Grand Committee
(5 years, 10 months ago)
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The Deputy Chairman of Committees (Lord Faulkner of Worcester) (Lab)
Good afternoon, my Lords, and welcome to the Grand Committee. If there is a Division in the House, the Committee will adjourn for 10 minutes.
Electronic Communications and Wireless Telegraphy (Amendment etc.) (EU Exit) Regulations 2019
(5 years, 10 months ago)
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Lord Ashton of Hyde
That the Grand Committee do consider the Electronic Communications and Wireless Telegraphy (Amendment etc.) (EU Exit) Regulations 2019.
The Parliamentary Under-Secretary of State, Department for Digital, Culture, Media and Sport (Lord Ashton of Hyde) (Con)
My Lords, digital infrastructure is central to the future of the UK economy. People now rely on being connected through calls and online services more than ever, whether at home or on the move, while communications networks underpin critical areas of the economy. This dependence will only grow with the deployment of new technologies such as 5G and full fibre, which will support innovative new services across manufacturing, logistics, agriculture and healthcare.
The current regulatory framework has created the right conditions for the improvement of connectivity in the UK. It has brought about regulatory certainty and long-term stability for the sector, creating a balance between robust competition, protection for consumers and innovation. However, that framework derives from an EU regulatory framework consisting principally of a number of directives which have been implemented in domestic law.
The UK’s withdrawal from the EU gives rise to deficiencies in that legislation if we leave the EU without an agreement in place. These regulations address those deficiencies and so provide clarity and certainty for communications providers and for the regulator, Ofcom. That is why this statutory instrument is before the Committee today.
I should make it clear at the outset that this SI is concerned with the core of the regulatory framework, in particular the Communications Act 2003. Other matters of relevance to the sector, such as legislation on cross-border data flows, mobile roaming and spectrum decisions, are addressed by separate instruments.
It is also important to observe that the EU framework has already been implemented in domestic law. We are not concerned here with incorporating swathes of EU legislation into UK law, but with making corrections to ensure that the law continues to function appropriately. Furthermore, the scale of those corrections is limited. While the EU framework aims to establish a harmonised telecoms market, that market is policed by national regulatory authorities in each member state, with the European Commission having only a supervisory role.
This SI is intended to ensure that Ofcom can continue to carry out its existing functions effectively. It does not transfer a plethora of new functions to Ofcom or the Secretary of State.
The Government published a technical notice on 13 September 2018 which set out that,
“irrespective of the outcome of the negotiations between the UK and the EU, we do not expect there to be significant impacts on how businesses operate under the telecoms regulatory framework and how consumers of telecoms services are protected”.
This SI is an important part of ensuring that continuity and certainty.
The domestic telecoms framework establishes key regulatory principles such as: the promotion of competition between operators; the protection of consumers of telecoms services; the efficient use of radio spectrum, and the independence of the regulator and its functions. As I have said, these rules derive from a set of EU directives and regulations which have already been implemented in UK law, predominantly in the Communications Act 2003 and in the Wireless Telegraphy Act 2006.
I have said that this instrument makes mainly minor and technical amendments to ensure the continuation of the regulatory framework. An example of such an amendment is the removal of a duty on Ofcom to ensure that its activities contribute to the development of the European internal market, set out in the Communications Act 2003.
Lord Ashton of Hyde
May I continue, if the noble Lord does not mind? My speech is a tightly woven whole, and it might answer some of the questions he is coming to. Later, I will of course answer as many questions as I can.
I will concentrate in the remainder of this speech on those corrections which I expect to be of the most interest to noble Lords. I turn first to the existing requirements on Ofcom to notify, consult or provide information to the European Commission and to other EU bodies.
Ofcom is required to consult with the Commission, the Body of European Regulators for Electronic Communications—BEREC—and the national regulatory authorities of other member states before imposing certain types of regulatory measures. In the case of certain proposed remedies, if the Commission expresses reservations, there is a “standstill” period during which Ofcom must co-operate with the Commission and BEREC. In certain other cases, the Commission can veto the proposed measures.
The Commission’s role is to ensure compliance with the EU regulatory framework and a harmonisation of the approach taken by EU regulators, in order to develop the single market. After EU exit, a power for the Commission and BEREC to scrutinise Ofcom’s decisions in this way will no longer be appropriate, and so this instrument removes these requirements.
Ofcom will continue to need to comply with procedural statutory requirements, including consultation, before it takes regulatory decisions. Once taken, those decisions remain subject to the same scrutiny as today—in particular, the right for affected parties to appeal to the Competition Appeal Tribunal.
EU law also requires Ofcom to provide information to EU bodies. Again, the information requested by EU bodies is generally provided to enable the European Commission to monitor compliance with the European framework or to ensure the harmonisation of measures across the EU. This will not be required when the UK is no longer part of the EU. However, sharing information with the Commission, EU bodies or other regulators in the EU may remain beneficial to the UK after exit—it can help foster co-operation on regulatory matters. That is why this instrument makes amendments which clarify that Ofcom may notify or share information where it considers it appropriate—for example, regarding network security breaches.
Other amendments have been made to ensure the retention of protections for consumers and to enable the regulatory framework to develop in a way that will bring about consistency for industry. In relation to consumer protection, Ofcom has put in place various rules to protect consumers of telecoms services, some of which implement specific requirements of EU law. This instrument makes provision to ensure that Ofcom is able to maintain consumer protection measures which are currently required under the relevant EU directive.
Turning now to corrections that will bring about consistency for industry, Ofcom has existing powers to regulate communications providers with “significant market power”, or SMP. SMP regulation is based on competition law principles, as set out in EU competition law, and enables Ofcom to impose regulatory remedies on providers with SMP to address competition issues in a particular market. This instrument amends the Communications Act 2003 to ensure that, after exit, references to dominance in a market are to be construed consistently with the concept of market dominance in the Competition Act 1998 rather than EU competition law.
This approach ensures that there is a single concept of market dominance across UK competition law post exit. It ensures consistency with the amendments to the Competition Act 1998 which this House approved on 4 December. In other respects, Ofcom’s powers to identify dominant players in the market and to make remedies will remain the same as pre-exit.
Telecoms legislation also includes certain directly applicable EU regulations, which require correction. This instrument revokes the regulations that provide for financial assistance from the EU’s Connecting Europe Facility to support telecoms, including funding to install wi-fi equipment in public spaces. This recognises that this legislation concerns EU funding mechanisms that cannot be retained simply by converting them into domestic law.
In the event of a no-deal exit, UK organisations will no longer be eligible for such funding. However, even if the EU stops making payments to UK organisations delivering CEF-funded projects after exit, the government guarantee will support UK organisations to meet their obligations—including continued project delivery—until completion. The HMG guarantee will also cover successful applications submitted to the EU before exit day but where the award was made after exit.
This instrument also makes corrections to the eCall legislation so that it continues to operate effectively after exit. eCall is an initiative established by the European Commission as part of the intelligent transport system project. It enables a mobile transmission to be sent to emergency services by a vehicle when it is involved in an accident. The eCall legislation refers in parts to technical standards. This instrument confers a legislative power on the Secretary of State to make provision to replace the standards listed. This will enable the standards to be updated, should this be necessary, to ensure continued public safety and effective operation of the eCall technology.
Finally, this statutory instrument revokes the 2009 EU regulation establishing BEREC, the body of national regulators from EU member states. Ofcom is currently a member. The main purpose of BEREC is to ensure the consistent implementation of the EU regulatory framework. BEREC’s membership is therefore limited to the regulators of EU member states. Ofcom will not be a member after exit, but as the UK will no longer be part of the EU regulatory framework, this will not have significant effects on regulation in the UK.
However, the Government and Ofcom agree that it may well be beneficial to have a continued exchange of regulatory best practice with other regulators and an exchange of information about telecoms matters more generally. The new BEREC regulation provides that BEREC participation should be open to third countries where appropriate agreements are in place. Ofcom intends to seek observer status after the UK has exited the EU, in the way that other regulators of states in the European Economic Area and EU candidate countries currently participate.
We are committed to ensuring that the regulation of telecoms markets continues to function appropriately after exit, providing regulatory certainty and the right conditions for continued investment and development. I commend these regulations to the House.
Lord Adonis
Before the Minister sits down, he said that he would come to my points later but he did not—although I accept that his speech was carefully woven and made a coherent case for the regulations. However, for the purposes of the Grand Committee, by far the most important issues in the Explanatory Memorandum are raised in paragraphs 10.2 and 10.3. These show that there were quite significant differences between the Government and some consultees on the shaping of the regulations and, in particular, whether there should be continuing obligations for consultation and reference in respect of decisions made by Ofcom as regulator, replicating the current powers and role of the European Commission. These look to be significant issues and the Minister did not mention them at all in his remarks. It seems to me to be important for the Grand Committee to understand what the consultation was, why the Government decided not to go with the view that there should be a regime that replicates that of the European Commission and why the Minister believes that we should go with the Government’s view rather than that of the consultees, who, I should say, are not named in paragraphs 10.2 and 10.3 so it is very hard for us to know who they are. Is this a matter on which we should seek further information and debate before we agree this regulation?
Lord Ashton of Hyde
I am very happy to answer that; it is a reasonable question. The Government undertook extensive consultation with the telecoms industry, the regulator and other interested groups such as consumer associations. I shall start with the telecoms industry and come to why we should accept what was said.
The Broadband Stakeholder Group assisted us in organising our consultation, which has continued from summer 2017 until now, so it was over a long period, and it counts all the major providers of telecoms and broadband services in its membership: Arqiva, BT, Cisco, CityFibre, EE, Ericsson, Gigaclear, Openreach, Sky, TalkTalk, 3, Virgin Media, Vodafone and Wireless Infrastructure Group, and also from the sector were included Tech UK, INCA, which is the body representing UK alternative smaller telecoms infrastructure providers, consultancies, law firms, the BBC, Avanti, a satellite company, and the Federation of Communication Services. They were all consulted, and, as the noble Lord said, the main area of interest concerned EU consultation. This was discussed from summer 2017 until October 2018.
The main difference is that the function of EU supervision is really to promote the harmonisation of the EU single market. Obviously, that is not appropriate if indeed we leave the EU. The appeals process to the decision that Ofcom will make continues, so the appeals tribunal will still exist and operate in exactly the same way, and so will the administrative court, which enables the telecoms industry to go to judicial review.
In fact, the European Commission has never once vetoed an Ofcom decision, so we do not think it is of huge significance but, as I said, the main reason for not replicating that is that it affects European harmonisation rather than the national regulatory system.
Lord Adonis
I am very grateful to the Minister, but will he confirm that many members of the stakeholder group disagreed with the line that the Government are taking, which is not to have a continued consultation role with the European Commission? That is an important issue which is not properly brought out in these papers. The reason they did, which I take to be implicit in paragraph 10.2, is that they do not think that Ofcom should have unfettered power to act without consulting appropriate parallel competition regulatory authorities. Specifically mentioned in paragraph 10.2 is the Competition and Markets Authority, but I take it that the European Commission is seen to be a parallel body from that point of view. Will he expand further?
Lord Ashton of Hyde
Yes, the body they would appeal to is part of the Competition and Markets Authority; it obviously has a completely different dynamic to the European Commission, which is there to harmonise the single market. It is true that they expressed those views, and it is probably fair to say that the sector would like as many avenues for appeal as possible—it is regarded as a reasonably litigious sector—but it was felt that because that was for harmonisation, it was not appropriate.
I can say that the industry, including that part of the stakeholder group referred to, is keen that the SI should be taken forward, because it wants clarity and a consistent regulatory framework. To that extent, it is happening.
The Deputy Chairman of Committees (Lord Faulkner of Worcester) (Lab)
The Question is—
Lord Adonis
If the noble Baroness will forgive me, I am still on my feet, so I will not give way to her. Will the Minister agree to publish—
Baroness Goldie
I am sorry. The Minister is not going to make any response, Lord Adonis, until you take your seat and allow me to make an observation.
Lord Adonis
The noble Baroness cannot make an observation unless I give way to her and I am not giving way to her, if she will forgive me.
Will the Minister agree to publish the minutes of the stakeholder group that he has referred to? It seems to me important in our proceedings that we understand what the consultation responses in fact were, as they were clearly at variance with what the Government have done. Will the Government do that before this matter comes before the whole House?
The Deputy Chairman of Committees
It might be helpful if I put the initial Question, which is that the Grand Committee do consider the draft Electronic Communications and Wireless Telegraphy (Amendment etc.) (EU Exit) Regulations 2019.
Lord Ashton of Hyde
In answer to the noble Lord, Lord Adonis, I am informed that I can publish them.
Lord Foster of Bath (LD)
My Lords, following that interesting exchange, I pick up where the noble Lord, Lord Adonis, began, by pointing to what he described as the Minster’s “carefully woven” speech. I confess that I do not quite agree with that definition, as the speech appeared to be a cut-and-paste version of the speech that was given by the Minister in the other place, Margot James, on 7 January. Having gone through that speech, I noticed that odd words were missed out in the noble Lord’s version. In the other place, the Minister thought that there may well be a case for Ofcom remaining involved in BEREC—the word “well” was missing in the noble Lord’s version.
More important, we should recognise that over the last 30 years the industry that we are dealing with, including within it the telecoms industry, has developed from a monopoly situation to a highly competitive market, with annual revenues now in excess of £40 billion. It therefore forms an important part of our economy. Because of the way in which the industry is intrinsically linked to the European Union, there is no doubt in my mind that Brexit will have a significant impact on it, not least because a number of UK providers operate in other member states but have headquarters in the UK. I also believe that Brexit will have a significant impact on the regulatory regime under which those providers operate.
The Minister said, as indeed did Margot James in the other place, that the draft regulations will provide “clarity and certainty” both for the operators and for the regulator. I am somewhat inclined to disagree with that view. Indeed, the technical notice to which the Minister referred, which was issued way back on 13 September last year, explained that, irrespective of the outcome of the negotiations between the UK and the EU, the regulations would not have a significant impact on how businesses operate under the telecoms regulatory framework or on how consumers of telecoms services are protected within the UK. That claim is highly questionable.
Before I turn to those impacts, I want to seek clarification on consultation, the issue that has occupied a few minutes between the noble Lord, Lord Adonis, and the Minister. In the other place, the Minister for Digital and the Creative Industries, Margot James, said:
“All the changes that the draft regulations will make have been considered on a case-by-case basis and discussed with the regulator and stakeholders where possible”.—[Official Report, Commons, First Delegated Legislation Committee, 7/1/19; cols. 3-4.]
One has to assume that she believes that, as the noble Lord said only a few minutes ago, extensive consultation has taken place. The noble Lord told us about consultation with the Broadband Stakeholder Group and listed its membership. Interestingly, he did not mention the other part of the equation, which relates to the telecoms industry. There is a major body—the UK Competitive Telecommunications Association, or UKCTA—which represents very many of the key stakeholders in that field: Virgin Media, Vodafone, AT&T, the Post Office, Sky, TalkTalk; I could go on. If extensive consultation has taken place, one would assume that that key body, UKCTA, has been involved in the discussions. Yet I have received a note from UKCTA—I would be grateful if the Minister could explain whether this is correct—which says:
“UKCTA has not had any advance notice of, or discussions about, the SI despite regular meetings with DCMS, the most recent being on Monday 14th January”.
Can the Minister explain whether what I am told is incorrect, and if it is correct, can he explain why, despite the Government having claimed that there has been extensive consultation, this important body in the industry and the sector has not been consulted? On the impacts of these draft regulations, which the Government say they do not expect to be significantly—
Lord Adonis
The noble Lord has just raised an extremely important point about consultation. As he knows, in the discussions which the Grand Committee has been having on these no-deal regulations, the issue of inadequate consultation has been a running theme. As we probe beneath the regulations, significant issues of substance come to the fore when the Government tell us that the changes that are being made are technical. In fact, the actual change brought about by this regulation is substantial, because it entirely removes the European Commission from the whole process of deciding on competition issues.
The noble Lord is much closer to this sector than I am, and he has clearly had contact with the UK Competitive Telecommunications Association—I have to confess that I was not even aware of the existence of that body until he mentioned it, which is a huge lacuna in my understanding of public affairs. The noble Lord told us that it had not been consulted but that he has been speaking to it. Can he tell the Grand Committee what its view is of these regulations? Clearly, that is a material point, but it will also be a material point when the House itself comes to consider these regulations, also in the light of the further consultation responses which the Minister has kindly agreed to publish after the meeting of the Grand Committee.
Lord Foster of Bath
I am grateful to the noble Lord for his intervention. I assure him that I am more than happy to help to resolve the lacuna he has, and I will go even further and share with him a few thoughts that that association has about the draft regulations before us. I will take one particular one, which is its reaction, and the reactions of many other people, to the Government’s claim that the changes envisaged in these draft regulations will not significantly change the protections that are currently enjoyed by consumers of UK telecoms services. That claim is disputed, and I am keen to hear the Minister’s reaction to that, particularly in relation to the fundamental question of who will now supervise the regulator.
The UK regulator is Ofcom, which is probably the most highly regarded regulator throughout the whole of the European Union. It is a regulator in which most of us have great confidence, but from time to time it can make questionable decisions. Within the EU arrangements there are processes which provide for oversight of decisions of all national regulatory authorities, including Ofcom. These processes are covered under Regulation 7, particularly 7(1). As the Minister knows, they ensure oversight of a regulator’s decision by the Commission, and peer review by other EU regulators—in this case by members of BEREC, which the Minister has already referred to: the Body of European Regulators for Electronic Communications.
Post Brexit, the EU checks and balances against bad regulatory decisions will clearly fall away, yet safeguards to ensure regulatory certainty, and safeguards against bad regulatory decisions, are critical to ensuring that businesses in this sector can have the confidence to make major investments. Can the Minister provide a clear explanation of how, under these draft regulations, Ofcom will be held to account post Brexit? Can he confirm that, for instance, the Digital Economy Act, which went through your Lordships’ House some while ago, has weakened the telecoms appeal regime and that all that appears to be left for those who believe that an Ofcom decision is wrong is the judicial review process? As the Minister said, in certain cases there might also be the opportunity to go to the Competition Appeal Tribunal, but in the majority of cases it would appear that we are left with only judicial review, which, as noble Lords know, has undergone some quite significant and worrying changes in recent times. Therefore, does the Minister agree that this is a significant diminution of the protections against bad decisions by the regulator, however infrequently they are likely to occur?
Lord Adonis
My Lords, the noble Lord is making a very powerful argument about the weakness of consultation and the problems that will be caused by these regulations. Is he suggesting that Ofcom itself said to him that it was not content with these regulations in their current form and that it is worried about the regime that will apply after a no-deal Brexit? That would be a very serious state of affairs if that were the case.
Lord Foster of Bath
That would be taking the interpretation of the conversations and correspondence I have had with Ofcom a step too far. I do not think that Ofcom feels that it is its place to comment on the rightness or otherwise of the regulations. However, it is pointing out very clearly that when these regulations come into force, its ability to do the work to the level that it wishes will undoubtedly be diminished because of its inability to influence future EU legislation which will have a significant bearing on companies that operate in this country. Equally—I shall come on to this in a second—its ability to engage in discussion and debate with fellow regulators in this field across the 27 EU countries will depend on what happens now.
I hope that the Minister will agree to extend his remit just a little in this discussion. It would be enormously helpful to hear from him what he understands the situation will be not only in relation to a no-deal Brexit but, if the Prime Minister is successful in achieving her deal, what it will be during the implementation period and then after it. So there are three possible scenarios in which it would be helpful to learn from the Minister how he thinks the arrangements will operate.
It might help him if I shared with him my own understanding of what the situation is likely to be and possibly made his response much briefer, because he could then say that I have got it right. In the debate on 7 January in the other place, Margot James acknowledged that,
“the Government recognise that Ofcom would benefit from the continued exchange of best practice with other regulators, and from the exchange of information about telecoms matters more generally”.
She went on to say:
“Ofcom intends to seek observer status after the UK has exited the EU”.—[Official Report, Commons, Delegated Legislation Committee, 7/1/19; col. 6.]
Can the Minister confirm that this is a huge oversimplification of the process that now applies in the event of a no-deal Brexit? In the past, it would have been a relatively simple matter for Ofcom to seek observer status. Under the rules that applied until December 2018, just a month ago, BEREC could simply have invited Ofcom to have observer status and that would have been fine, but the BEREC regulations have changed and are now very different. I am sure that the Minister will confirm that, under those regulations, the only possibility of Ofcom having even observer status on BEREC is if the European Union has agreed to it. That would require the UK Government specifically to negotiate such an arrangement with the EU. I would be grateful if the Minister could confirm that that is the case, because it is very different from saying that Ofcom will seek observer status. The Government will have to engage positively in negotiations with the European Union to bring that about.
Can the Minister also confirm his understanding of the position of Switzerland? It is a very good example, because its regulator was an observer member of BEREC. With the change in rules in December 2018, it no longer has observer status and the Swiss Government are currently in extensive negotiations with the European Union to see whether agreement can be reached for that to happen—there is no certainty that it will, any more than there will be certainty, for reasons that I shall come on to in a few minutes, about an agreement on this matter being reached between the UK Government and the European Union.
I accept that the Minister is slightly stretching the issue, but I hope that he will confirm that under transitional arrangements of the withdrawal agreement—if the Prime Minister is successful in getting her deal through—the key provision is Article 128 along, in part, with Article 8, which states clearly the UK has no right to participate in decision-making or governance of any EU bodies and no right to attend meetings. During the transition period, there will no opportunity for Ofcom to be involved—with, however, one caveat.
The caveat comes in two parts. It says that there are exceptions: Ofcom may be allowed to pop along for the odd meeting and to participate in discussions but not have a vote, but only in the very limited case where BEREC is discussing a specific case that relates to the United Kingdom or if, by having Ofcom present, it would be beneficial to the EU as a whole. That is a decision for it to make. I would be grateful if the Minister could clarify the point. My understanding is that if the Prime Minister is successful in getting a deal, during the transition phase, the position of Ofcom will be even worse than it would be if it had observer status. That, I believe, would be significantly detrimental to the UK. Post Brexit, if the Prime Minister is successful with her deal, clearly the situation will be somewhat uncertain because it will depend on the interpretation of and success of the negotiations. However, the draft political declaration covers the issue in paragraphs 33 to 35 and 40 to 42. It would be helpful to hear the Minister’s views on how he thinks that this will work out.
My final point is simply this. All of this is dependent on an agreement. Whether we are in the situation of a no-deal Brexit as regards the regulations before us or even if the Prime Minister achieves her deal and we have a transition period with an exit being subject to whatever arrangements have been made, it will all depend on whether the UK has achieved a data adequacy agreement with the European Union. Nothing can happen unless we have one because it is absolutely crucial. I could read out to noble Lords many learned articles about whether it would be possible for the UK to get a data adequacy agreement easily or even to get one at all. For instance, criticisms are already raging about the impact of the investigatory powers legislation, the GDPR regulations, the e-commerce and e-privacy regulations and so on. Whether those will enable us to get a data adequacy regulation or prevent us doing so is very unclear indeed.
I have raised some important points and I look forward to the Minister’s response. Above all, however, he must give us a clear understanding of the Government’s view about the likelihood of us getting a data adequacy agreement. The Minister in the other place made it absolutely clear that if the Prime Minister gets her deal and we have a transition period of almost two years, it will take the whole of those two years to get agreement on data adequacy. She went on to say that if we have a no-deal Brexit, the chances are that getting such an agreement will take even longer. Does that not mean that all of the claims that there will be no significant impact as regards these regulations on people in the UK, both service providers and the regulator, really do not stack up?
Lord Adonis
The noble Lord has referred to the data adequacy agreement, which is clearly an important issue. What is his understanding of what the impact would be on the United Kingdom if we did not secure such an agreement in the event of a no-deal Brexit? Presumably it will be quite a tall order to get such an agreement in the next eight weeks.
Lord Foster of Bath
Let me give the noble Lord one example. I said earlier that for Ofcom to become a member of BEREC, it is no longer a case of it going to BEREC and saying, “Please can we have observer status?” It will require a negotiated agreement between the UK and the EU. In my view and those I have spoken to about this, the agreement will not be reached unless we have an adequacy agreement. If the adequacy agreement is going to take at least two years and may not be achieved anyway, then during the whole of that period there is no way of Ofcom performing any role whatever within BEREC, for example.
Lord Adonis
Does the Minister want to respond to the noble Lord, Lord Foster, before I and my noble friend speak?
Lord Ashton of Hyde
I do not think that I can stop the noble Lord speaking whenever he wants.
Lord Ashton of Hyde
The noble Lord asked a lot of questions. Underlying it all is the fact that this SI is there in the event of no deal. Of course, it is not surprising that references to and some of the effects of being in the EU are going to change. The essential point of the SI is that telecoms regulation is performed by national regulatory authorities with EU supervision. The issue is whether the supervision element is significant. The whole point of the SI is to make the regulatory system the same after we leave. The noble Lord made a lot of mileage out of whether we would remain a member of BEREC—
Lord Foster of Bath
The issue is not about the regulatory regime staying the same but about who is regulating the regulator. I hope that the Minister will come on to that.
Lord Ashton of Hyde
Yes, absolutely. I will come on to that because nobody regulates the regulator today.
The noble Lord asked me to go beyond no deal to what happens to our membership of BEREC if we have a negotiated deal with an implementation period. During that period, the UK will no longer be a member state of the EU but, as is set out in the terms of the withdrawal agreement, common rules will remain in place. That is why we expect Ofcom to continue to participate in BEREC in line with the terms of the agreement, in the way that the noble Lord, Lord Foster, mentioned.
I point out to noble Lords that there is every reason to suppose that the EU would want that, because Ofcom is one of the leading telecoms regulators in Europe—if not the leading one. The interchange between Ofcom and other European regulators has been extremely beneficial, not only for them but for this country. There is every reason to think that they would wish to continue that—
Lord Foster of Bath
I am sorry. The noble Lord is entitled to assert whatever he likes, but I specifically read out a section from the withdrawal agreement, which says, and I repeat, that the UK has no right to participate in decision-making or governance in any EU body of any type and no right to attend meetings. I have given the two caveats: the first relates to any discussion that,
“concerns individual acts addressed to the UK”,
or persons residing or established in the UK; and the second is that the presence of the United Kingdom is,
“necessary and in the interests of the Union”.
It is all very well for the Minister to say that he hopes that it will be perfectly all right and that the EU will have us for other things, but a specific clause in the withdrawal agreement says the opposite.
Lord Ashton of Hyde
I was going to read out that exact clause to make my point. If it is,
“in the interests of the Union”,
or where the discussion concerns acts addressed to the UK and its citizens, it provides that the UK will continue to participate in EU agencies and bodies. I think that those two things apply and, as I was saying, the reason why I think that is the mutual benefit Ofcom has. It is a world-leading, well-respected regulator. However, I accept that it does not have the right to do these things. That is not surprising, because we are leaving the EU. Why should it have the right? I think that we have come to stalemate on that point.
The noble Lord mentioned the fact that BEREC rules have changed and that it is not just a question of having been invited to be an observer. He is absolutely right: either there has to be an agreement with the EU as part of a future economic partnership or a bilateral agreement can facilitate it. Under that facility, which the EU has deliberately put in the new BEREC regulations, Ofcom can—under a bilateral agreement—be a member of the board of regulators, the working groups and the management board.
I will move on to data adequacy later. The important issue that both noble Lords mentioned is, crudely put, whether the regulator will still be regulated. The European Commission does not regulate Ofcom. It has a supervisory power, which is principally designed to ensure the consistency of regulatory practices across the EU, in order to contribute to the development of the single market. It is quite understandable that the EU should want to harmonise national regulators to facilitate the single market. Of course, if we leave the EU, that will no longer apply. The role of the European Commission in telecoms regulation is unique and should not be compared to EU scrutiny powers over other UK economic regulators. There is sufficient accountability in the domestic system, because Ofcom decisions can be challenged in the courts—of course, the primary area in which they are challenged is in the statutory appeal before the Competition Appeal Tribunal.
In fact, the withdrawal Act is not a vehicle for policy changes, as I am sure the noble Lord, Lord Adonis, will remind us. We think that, under the terms of the Act, recreating a domestic equivalent for the oversight of Ofcom’s decisions will be considered going beyond what is appropriate to correct the deficiency.
Lord Adonis
I am grateful to the Minister, but does he not accept that this could be argued both ways? It is clear from reading the materials available to me that one could say that replicating the status quo means having some consultation and appeal role for a competition body above Ofcom, which is the role currently played by the European Commission, or one could take the Government’s view that there should not be such a role. It appears to me that the reason why this has happened is twofold: first, because the whole government mindset is to have as little Europe as possible—as a matter of prejudice the Government do not want any continued consultation role for the European Commission, even if that might be in the best interests of Ofcom and the robustness of our regime, given how intertwined our companies and industries are—and, secondly, because Ofcom would obviously prefer not to have any oversight. Any regulator in Ofcom’s position would much rather not have somebody else marking its homework. It appears that the Government have been unduly swayed by Ofcom in drawing up these regulations, particularly in the light of the observations from the noble Lord, Lord Foster, that key industry groups have not even been consulted.
Lord Ashton of Hyde
I do not think that you can argue it both ways. Of course we will not be involved in the EU supervision, given that the whole point of the supervision is to affect the European single market, of which we will not be a part. To set up a completely new supervisory authority, with a completely different function from what it had before, would, I think, be beyond the powers of the withdrawal Act—it will obviously be different if we are not talking about EU supervision to maintain regulatory harmony.
I come to both noble Lords’ points about the consultation, because I do not believe that they are true. The noble Lord, Lord Foster, made a reference to the UKCTA—its members, by the way, are also members of the BSG—and read out the names of a number of companies that are part of the group which facilitated the round tables. There may be a disagreement with us, as my information is that it was asked to at least one of the round tables. It has met DCMS and has had the opportunity to raise concerns about the SI—as he said, it met DCMS only very recently—and of course our technical notice explains some of the problems and issues about telecoms regulation when we leave the EU, so it is not as though it did not mention it. Therefore, some of that body’s members have sat round the table with DCMS; they have been asked. There is no requirement to send the draft SI to industry, but it had every opportunity to contact DCMS and every opportunity to raise it at the meetings that the noble Lord referred to. We have ongoing and good relations with all parts of the sector, so there is absolutely no reason why, if there is a problem, it could not be raised with DCMS. I do not accept that in this case the consultation has been insufficient. We have had regular and continued consultation with the industry, not only with the telecoms sector but also with consumers and Ofcom itself.
Lord Foster of Bath
I do not think that it is necessary to pursue this; I am merely making a simple request. Given that this body says that it has not been consulted—I entirely accept the Minister’s point that the draft regulations have been published and so it could have read them and perhaps could have come forward and said, “Can we discuss this?”—can the Minister just give the Grand Committee an assurance that it will now be invited to come and have a discussion about its concerns on these draft regulations? Then we can move on.
Lord Ashton of Hyde
It is of course a bit late to consult it on the regulations, but we will definitely do so in future. I will try to find out where we have a disagreement on fact—whether it was able to be consulted—and will let the noble Lord know about that. I appreciate his allowing me to move on.
There is an important issue about data adequacy, which the noble Lord, Lord Adonis, mentioned. He asked whether it would happen in the next eight weeks. Of course, what he does not realise is that it cannot happen in the next eight weeks, because you cannot have data adequacy until you are a third country. You will never get data adequacy until exit day; when that will be is another matter. Data adequacy is an important issue. We have said that there will be no restriction on personal data flowing from the UK to the EU; the issue is entirely about personal data flowing from the EU to the UK. What are we doing about it? We have spent a lot of time talking to member states, explaining our mutual interest in having data adequacy. We should not forget that we start from the exact same position, because we have implemented the GDPR. We are therefore in a good position.
The EU has indicated—it has not said it formally—that it will be ready to discuss data adequacy as soon as exit day comes. We are ready to do that, but in the meantime there is a possibility that there will be a gap between when we leave the EU and whenever we get data adequacy. To cope with that gap there are mitigations and ways round it—standard contractual conditions for contracts, for example. We are ramping up the speed of publication and are making industry aware of this. There will be a significant amount of progress on that over the next few weeks. It is always frustrating when you spend time talking to trade bodies—we are talking to about 50 companies a week at the moment, and we will double that—and, despite all that work, people still say that they were not aware of it. We saw that with the GDPR. However, we have a publicity campaign; work is going on to try to make people aware and, for example, to encourage them visit the ICO website, which gives examples of ways to mitigate in case of a gap.
Lord Adonis
My Lords, the Minister has done a conscientious job of explaining the regulations and dealing with the concerns raised by the noble Lord, Lord Foster. However, I did not greatly care for the intervention at the beginning by the noble Baroness, Lady Goldie, which sought to prevent me from posing questions to the Minister. I hugely respect the noble Baroness, but it is important to understand what is going on in this Grand Committee. We are making significant changes to the law. It is true that we are doing so in an emergency situation because we have to agree things in the next eight weeks in case the United Kingdom crashes out of the EU without a deal, but we should not minimise the fact that we are making significant changes to the law. Because of the emergency nature of events, we are doing this by means of statutory instruments, but the fact that these are called statutory instruments does not make the changes to the law less substantial.
The changes to the law involved in this one statutory instrument would, in the normal course of events, require primary legislation, with Second Reading, Committee, Report and Third Reading. We would have ample opportunity to engage with the Minister, move amendments and probe issues around consultation and appeal mechanisms and so on, which we have been debating across the Floor. Because of the constraints of the statutory instrument process, all this is being done by means of one statutory instrument, with one debate in Grand Committee and potentially another in the Chamber.
When we went to the Chamber on the venture capital regulations yesterday, I had expected that the Minister, the noble Lord, Lord Bates, would present the regulations to the House in the light of the debate that had taken place in Grand Committee and to reply to that debate. I thought that he would do the same on the interchange regulations; the noble Baroness, Lady Bowles, who is in her place, had raised a lot of significant policy issues on those regulations. But things did not happen at all as I had expected. What happened was that the noble Lord, Lord Bates—
Lord Ashton of Hyde
The noble Lord is kind to let me in. I think he is in danger of making a generic speech here. In this SI, we are retaining the status quo in telecoms legislation. We are trying to maintain EU law, which has been implemented in UK law. I accept that there are changes—for example, the European Commission is mentioned in relation to supervision—but obviously those changes will result from our coming out of the EU. I do not accept that, in this case, we are making substantive changes. I suppose that one area that one could argue we are changing is giving the Secretary of State powers to amend regulations so that the eCall system works. That is clearly to everyone’s benefit who drives or travels in a car. That is one area where we are possibly giving the Secretary of State more powers, but I do not accept that there is a whole swathe of legislation that normally would have required to be made through primary legislation.
Lord Adonis
I am grateful to the Minister for that intervention, but I note that the issues raised in paragraphs 10.2 and 10.3 of the Explanatory Memorandum indicate that significant players in the industry do not accept the statements that he has just made. They do not accept that this is the best way of transposing the status quo into a new regime following a no-deal Brexit. On the contrary, as I will explain in a moment, they think that the Competition and Markets Authority should have replicated the existing role of the European Commission, but the Government decided not to do that. I accept that the Minister has said what he said in good faith, but what he said is not the view of a large number of players in the sector.
Lord Ashton of Hyde
The noble Lord is surely not suggesting that every time we have a consultation we should agree on everything with every person who is consulted.
Lord Adonis
My Lords, the problem with this situation is that we do not know what happened in the consultation, because nothing has been published. Let me read out what paragraph 10.1 says, so that it goes on the record. Under the heading “Consultation outcome”, it says:
“Informal consultation has been undertaken with Ofcom, whose views have been taken into consideration in development of the instrument”.
In the case of informal consultation, nothing is published. Indeed, I am anxious to read the letter that Ofcom sent to the noble Lord, Lord Foster, because it will be the only thing that has come out in public saying what Ofcom actually thinks. For the process of making the law, the right course to pursue would have been to have had a formal consultation, with Ofcom’s formal view, but the Government did not do that. At the moment, we are legislating in the dark.
Lord Ashton of Hyde
Ofcom has been consulted all along. It worked with DCMS in drafting the SI. It is keen to retain its independent status. It will not come out and say, “This is a joint DCMS/Ofcom SI”, but it has been consulted all the way along. It was instrumental in the drafting of the SI.
Lord Adonis
I do not for a moment expect that Ofcom should be required to agree. On the contrary, it is the job of the Government and Parliament to decide what the law and the regulations will be. However, it is our responsibility as parliamentarians to be fully informed about what the stakeholders think. Nothing has been published. The consultation with Ofcom has been informal. We have no details of the consultations referred to in paragraph 10.2. The noble Lord, Lord Foster, told us that the UK Competitive Telecommunications Association, which some of us had never heard of before, was not consulted. The Minister says that it was consulted. This issue of what in fact happened is still not resolved across the Grand Committee. The whole situation is unsatisfactory.
To complete the broader point that I was making in respect of the noble Baroness, Lady Goldie, I do not think it reasonable to curb the rights of noble Lords to question Ministers on fundamental changes to the law of the kind that are being proposed simply because it is inconvenient to the Government, but that is what the noble Baroness and other Ministers have sought to do.
Baroness Goldie
I thank the noble Lord for allowing me to intervene. I am interested in his surmise, because he gave me no opportunity to say why I wanted to intervene. In fact, there was a procedural issue to be addressed by the Chairman. I say to the noble Lord that there are rules, practices and courtesies in this House, which are listed in the Standing Orders and detailed in the Companion, whose purpose is to ensure that opportunities exist for full debates on important issues such as this. I would merely have observed earlier that the noble Lord should be careful not to stray into repetition, which Standing Orders do not permit, and be careful not to be accused of speaking on multiple occasions. I think I am not alone in being unclear about whether he is currently making a speech or another intervention. I merely ask him to observe the courtesies which everyone else in the House tries to observe for the mutual benefit of the House and all Members.
Lord Adonis
I am very grateful for the noble Baroness’s explanation but I do not believe that I was in any way infringing the courtesies of the House in seeking to question the Minister. The job of a Grand Committee is to elicit from Ministers information which is relevant to our consideration of these matters. However, we do not have the equivalent of a Committee stage in which we can propose amendments and hear explanations from the Government, which can then be questioned, so the only mechanism that we have in Grand Committee is to ask direct questions before the Minister sits down. Therefore, I do not accept for a moment that I was infringing the courtesies, the Standing Orders or the reasonable procedures of the House.
Unfortunately, it has become a pattern in Grand Committee for Whips to seek to curb proper debate and discussion. They are trying to railroad through these significant changes to the law with the minimum debate and the minimum questioning possible. I absolve the Minister from any intent to refrain from giving information, because he has been very forthcoming.
Lord Ashton of Hyde
Perhaps I may help. There is another way in which the noble Lord could find out the information that he requires. He knows well in advance that these SIs are coming up, so he could always write to me and ask.
Lord Adonis
My Lords, I would be delighted to write to the noble Lord when his next lot of SIs are due to come before the Grand Committee and ask him for more information, but until I have heard the explanation and his account, it is often difficult to know what questions one wants to ask. I should observe that at the moment we are having these statutory instruments at the rate of about 20 to 30 a week, so, although I take my duties as a Member of the House very seriously, it would not be possible for me to correspond with Ministers in advance of each of them in a way that would be productive, given that we are going to debate them in any event.
Lord Ashton of Hyde
The noble Lord would be able to spend less time in Grand Committee, so he would have some more spare time.
Lord Adonis
I am not sure whether the noble Lord meant that as a serious contribution to the debate. I cannot think of anything that I would find more felicitous than engaging in correspondence with the Minister, so I would be happy to do that hereafter.
I sense that we will return to the issues raised in paragraphs 10.2 and 10.3 of the Explanatory Memorandum when the regulations go to the Chamber. The Minister has already undertaken to publish the relevant minutes of the Broadband Stakeholder Group and it is important that we have an opportunity to take account of those before these regulations go to the House. If the Minister does not mind my saying so, we will need to have resolved what consultations have taken place with the UK competitor telecoms authority and its members, and having that information before the House would be useful too. That is important to enable the House to make a judgment on the issues raised in paragraphs 10.2 and 10.3. Perhaps I may read to the Grand Committee what is said there:
“Some stakeholders expressed concerns that removal of the requirement for EU consultation on certain Ofcom proposed regulatory measures (and in particular the Commission’s ability to require Ofcom to withdraw its proposed measure in some circumstances) … amounted to loss of a valuable check on Ofcom’s decision-making. Those stakeholders proposed that an equivalent function be recreated domestically (for example, requiring the Competition and Markets Authority to approve certain of Ofcom’s proposed measures”.
The Minister has just said that doing that would involve a change in the status quo. However, the contention of stakeholders in the sector is that, far from constituting a change in the status quo, it would transpose an equivalent function to the one currently performed by the European Commission once we leave the European Union. To me, the issue set out in paragraph 10.2 is significant, and the noble Lord, Lord Foster, who is much more knowledgeable about the sector than I am, made the concern of the sector a significant part of his remarks.
I entirely agree with the Minister that the Government should not be expected to give a veto to telecoms companies and other stakeholders which is in any way unreasonable. I accept that; as a former telecoms correspondent for the Financial Times, I am only too aware of the market power of those bodies, and it is important to have strong regulators. I am not saying that those telecoms companies and interest groups are necessarily right—the Government might be right not to give further supervisory powers to the Competition and Markets Authority that would lead to further appeals, litigation and huge expense to the public—but my concern, which goes to the whole procedure of dealing with these no-deal regulations, is that this is an important issue. I think that the Minister would accept that it is a pretty significant issue in terms of the construction of the regulatory regime. This decision has been taken on the basis of no formal consultation, and the views of stakeholders have become apparent to your Lordships only during this debate and were brought up particularly by the noble Lord, Lord Foster.
Lord Ashton of Hyde
That is not right. That is why the Explanatory Memorandum specifically mentioned their views. It is not that the noble Lord has found them at the last minute, because he was citing the very Explanatory Memorandum that told him that there were opposite views, which we disregarded for reasons with which I think he agrees.
Lord Adonis
Let me correct myself. The Minister is quite right that the Explanatory Memorandum mentions that at paragraph 10.2. However, all it says is “some stakeholders”, so there is no explanation of who those stakeholders were. The noble Lord, Lord Foster, brought out who they were and why they hold those views. For our next consideration of this measure, we need to know more about which stakeholders expressed the views in paragraph 10.2 and why they did so, so that we can form a view as to whether the Government’s judgment, which is that there should be no role for the Competition and Markets Authority, is correct or whether the right approach would have been to have given some supervisory role to the CMA, as is envisaged by the stakeholders in paragraph 10.2.
Lord Ashton of Hyde
This may help the noble Lord and cut down on the time. I have been told that we will continue to consult the industry on the scrutiny of Ofcom’s draft regulatory decisions, but we do not believe that this SI is the vehicle for such policy changes—because that is what they are. I committed to the noble Lord, Lord Foster, that I would outline the people whom we had consulted. I take his point about a formal consultation; we decided not to do that, but that is not to say that there has not been extensive consultation, which I have agreed to make clear. I hope that the noble Lord will accept that we will continue to consult on that, but will not do it through this SI.
Lord Adonis
I fully accept what the Minister said. He has been very forthcoming in making further information available to noble Lords. It would be very useful to us to have that further information before these regulations go to the House. We need that further information so that we can form a judgment on whether the Government’s decision as to how they will frame the regulatory regime after 29 March, if we crash out of the EU, is correct or whether it would have been appropriate to have in domestic arrangements some function equivalent to that performed by the European Commission; for example, by requiring the CMA to approve certain of Ofcom’s proposed regulatory measures. I hope that the Minister will be able to make that information available to the House so that we can form a judgment when this regulation comes to the House.
Lord Griffiths of Burry Port (Lab)
My Lords, I suspect that all present will be delighted to hear that I do not intend to detain your Lordships for very long. This has been a clash of the Titans, and a lot of material has come out from the noble Lords, Lord Foster and Lord Adonis, and the Minister’s responses. Having read diligently the papers that I had and highlighted the questions which concerned me, I find, alarmingly, that they have all been dealt with. For that reason, and hearing the question about repetition, I shall not go over the ground again.
However, I would make one or two observations, perhaps from a different angle. For example, I note at the beginning of the Explanatory Memorandum the number of Acts of Parliament and other measures that have had to be gone through with a tooth comb to produce 10 pages of minutiae—which in their totality are more than minutiae—affecting legislation in the way that the noble Lord, Lord Adonis, says. I would like to know as a point of information how many hours have been spent on teasing out these details in order to produce this one statutory instrument. On page 2, it deals with minor affairs and states that it must not be confused with other statutory instruments which will soon come through. It beggars belief that all this lies ahead. I read The Pilgrim’s Progress when I was a young man. The slough of despond and the swamp of despair are lurking and waiting for us before we will get to the celestial city.
Lord Adonis
Dante is more appropriate because he talks about the circles of hell.
Lord Griffiths of Burry Port
We will have to have a consultation about that in order to find out who forms which view about Dante’s Inferno.
There are two focal points to my remarks. I wanted to ask about the data adequacy agreement but the Minister has answered that. I also wanted to ask: who regulates the regulator? I was very interested indeed to read about Ofcom. While I in no way have the level of expertise of other noble Lords who have spoken, just reading the text—I know how to do that—what hit me between the eyes begged questions: is this regulation or supervision? Are we talking about harmonisation? I have sat in on several debates to try to gauge what is happening in consideration of these statutory instruments and I am beginning to form the view that between where we are now and where we expect to be if all goes according to plan, in several instances there will be a lessening of the oversight and direction that we have currently through our membership of the European Union.
For example, I listened to the debate on nuclear safeguarding yesterday. I was not convinced by either the debate or the material I read that the concerns being expressed would be adequately met. It was a similar case as regards non-native invasive species. Again, I was left with questions which may be answerable: I am not an expert in these fields. However, simply because we are under pressure to agree to these statutory instruments, we must not go on driving them through in such a way that in the end the accumulation of feeling about what we are achieving is that we are making too much haste and should have a bit less speed. I know that there are just 70-something days and the pressures that we are under, but in the end we will have to live with what we decide now.
All of those Acts of Parliament were carefully gone through. I have just one brief observation to make about Ofcom because the others have been made. Most of my consideration was on paragraph 10, but I will not cover that at all. However, in paragraph 7, I find that again and again what Ofcom is required to do while we are a member of the European Union “may” turn into something later. The indicative mood turns into—what? Is it the optative or is it the subjunctive? The word “may” allows itself to be interpreted either way. The optative reflects the mood of wishful thinking while the subjunctive reflects the mood of doubtful assertion. I am truly interested in knowing whether Ofcom’s different field of endeavour and focal points amount to it having the same quality and weight of oversight that it currently enjoys and whether the subjective element which is being introduced by the verbs I have described allow for a different way for it to operate or a different mood to be generated. I do not know, because the words do not allow me to make a deduction and I have certainly not heard this mentioned or dealt with in our discussion thus far.
I said that I would not detain noble Lords for long and I shall not. I am normally an optimistic person and I end my short interventions by saying that I look forward to the next one. However, I sit down on this occasion in a more desultory manner, not sure that I do.
Lord Ashton of Hyde
I am sorry that the noble Lord is not looking forward to my reply—he would not be the only one. Let me answer some of his points.
He asked how many hours have been put into the production of the SI. I cannot tell him exactly, but we have been working on it for about 18 months to allow for the engagement of stakeholders and other government departments and the appropriate legal checks. The consultation might not be to everyone’s liking in the sense that it was not formal, but it was real and I shall share some more information with the Committee about who turned up. It was real and, for the reasons that the noble Lord, Lord Adonis, gave, we may be vindicated in our decision not to include another regulator on top of Ofcom. I think I have covered that.
When the noble Lord, Lord Griffiths, talks about whether it is regulation or supervision and a lessening in oversight, the point to bear in mind is that telecoms have always been regulated by national regulators. The EU Commission has a very particular role in this connected with EU matters—namely, the single market. It is obvious that if we are no longer in the EU and the single market, not only will that supervisory function not be performed by the EU because we will not be in it but there will not be a harmonisation problem.
Lord Foster of Bath
I said that I would not intervene but I am intervening. The Minister is well aware that the financial consequences of telecoms companies, for example, in the UK, which do not abide by regulations imposed by the European Union will be significant. Even following Brexit, there will be huge impacts, one upon another. Therefore, to suggest that Ofcom does not have to have regard to that is just wrong.
Lord Ashton of Hyde
I may have missed the noble Lord’s point. The regulatory framework set up through EU directives and regulations has been implemented in UK law and is administered and regulated by the UK. It will change, so in certain cases we have provided that Ofcom, the regulator, will bear in mind the current status of EU directives but in future will have the liberty to move away from them, which is only to be expected because we will not be in the EU. Therefore, we have taken account of EU law as we are trying to maintain the existing regulatory framework, although I accept that in future we might move away from it. The noble Lord, Lord Foster, says that it is changing. It is, and the basis of this SI is that we are leaving the EU, so there is change.
The noble Lord, Lord Griffiths, asked about paragraph 7 of the Explanatory Memorandum: why Ofcom may exchange information with the EU Commission or BEREC. The reason is that it will be given the option to do so if it is in the best interests of this country. It would be perverse to deny it the option to do that, so we are giving it that power. Both noble Lords rightly made the point that it will not, ex officio, be a member of BEREC. We expect it to be either an observer or a member of the various groups that I mentioned, and we hope that it will be. Whether it is or is not, we think it would often be in the regulatory interests of this country to exchange information. I think it is extremely likely that it would do so and I am sure that regulatory information will flow the other way. It is the subjunctive, I feel, in answer to the noble Lord’s question.
I am grateful for the consideration of the instrument and expect a very brief further discussion—consultation, possibly—later; I have made commitments on that. We think that the amendments contained in the SI are essential to ensure legal clarity, to reduce litigation risk and to protect consumers. Beyond that, we have agreed on the necessity for the regime to exist to correct deficiencies in retained EU law. On that basis, I hope that noble Lords will be able to approve the consideration of the regulation.
The Deputy Chairman of Committees (Baroness Garden of Frognal) (LD)
The Question is that the Motion be agreed to. As many as are of that opinion will say “Content”; to the contrary “Not-content”.
The Deputy Chairman of Committees
I must remind the Grand Committee that a single call of Not-Content has the effect of negativing the Motion.
Money Laundering and Transfer of Funds (Information) (Amendment) (EU Exit) Regulations 2018
(5 years, 10 months ago)
Grand CommitteeRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Lord Young of Cookham
That the Grand Committee do consider the Money Laundering and Transfer of Funds (Information) (Amendment) (EU Exit) Regulations 2018.
Lord Young of Cookham (Con)
My Lords, this statutory instrument, laid under the EU withdrawal Act 2018, is part of the legislative programme that the Treasury is undertaking to ensure that there continues to be a functioning legislative and regulatory regime for financial services in the EU. The statutory instrument has been debated and approved by the House of Commons. The SI will fix deficiencies in UK anti-money laundering law to ensure it continues to operate effectively post exit. The approach taken in this legislation aligns with that of other SIs being laid under the Act, providing continuity by maintaining existing legislation at the point of exit.
Turning to the substance of the SI, many noble Lords will be familiar with existing anti-money laundering legislation. The money laundering regulations set out the requirements on regulated firms to combat money laundering and terrorist financing. Further, the EU Funds Transfer Regulation specifies what information must accompany electronic transfers of funds. Finally, the Oversight of Professional Body Anti-Money Laundering and Counter Terrorist Financing Supervision Regulations established the Office of Professional Body Anti-Money Laundering Supervision within the Financial Conduct Authority in early 2018. Anti-money laundering legislation is designed to combat illicit finance, while minimising the burden on legitimate businesses.
In a no-deal scenario, the UK would be outside the EEA, and outside the EU’s legal, supervisory and financial regulatory framework. Therefore, these three pieces of anti-money laundering legislation would need to be updated to reflect the new position of the UK, and to ensure that the provisions work properly in a no-deal scenario. The changes primarily affect the financial services sector, but the impact will be minimal and we have engaged with industry extensively to ensure that affected firms are aware of the changes that we are making. These draft regulations will make the following changes to the UK’s anti-money laundering regime.
First, this SI will equalise the regulatory treatment of European Economic Area member states and “third countries” for correspondent banking relationships—that is, when one bank provides banking services on behalf of another bank. Currently, UK financial institutions apply enhanced due diligence measures to correspondent banking relationships with financial institutions outside the EEA. However, these measures are not required for intra-EEA relationships.
This SI will equalise the regulatory treatment, meaning that enhanced due diligence will be required for all correspondent banking relationships. This change better aligns with the Financial Action Task Force standards on the issue, and the existing practice of many UK institutions, which already apply enhanced due diligence because of the risks associated with correspondent banking relationships. The SI will also equalise regulatory requirements on the information about the payer and payee accompanying electronic transfers of funds. Therefore, UK payment service providers will be required to provide higher volumes of information accompanying transfers into EEA member states and other countries. These changes are being made to reflect the UK’s new position outside of the EU’s regulatory framework.
Secondly, this SI will transfer from the Commission the responsibility to make technical standards, which specify the additional measures required to be taken by credit and financial institutions with branches or subsidiaries abroad, to the Financial Conduct Authority. These standards are of a type similar to those currently made by the FCA, in an area where they have technical expertise. Therefore, the FCA is the appropriate body to take on this responsibility. The transfer of this power is necessary because the relevant standards are currently made by the European Commission.
Thirdly, this SI removes the obligation for certain UK persons to have regard to guidelines published by the European supervisory authorities. The UK will be outside the EU’s regulatory framework, so it would be inappropriate for UK persons to be legally required to have regard to these guidelines. Firms will continue to be required to have regard to guidance developed by UK supervisory authorities and industry bodies, thereby maintaining the same strong standards to counter money laundering and terrorist financing.
Finally, the current money laundering regulations require certain information to be communicated to EU institutions. These provisions will be removed, as they would no longer be appropriate once the UK is no longer a member of the EU. The House of Lords Secondary Legislation Scrutiny Committee queried the change in requirements to transmit information to EU institutions, and whether the FCA would be co-operating with its counterparts in other countries to combat illicit finance. However, the changes to information-submission requirements made by this SI relate to specific duties to provide information directly to EU institutions, such as the national risk assessment of money laundering and terrorist financing.
Legal obligations to submit this information would be inappropriate once the UK leaves the EU. It is important to emphasise that UK supervisory authorities, including the FCA, will continue to co-operate extensively and make information available to overseas anti-money laundering authorities in relation to firms which have offices within the UK. Therefore, UK authorities will continue to make use of international co-operation to detect, prevent and investigate money laundering.
The Treasury has been working very closely with the FCA in the drafting of this instrument. It has also engaged extensively with the financial services industry on this SI, including UK Finance and relevant trade associations, and will continue to do so in relation to other SIs within the onshoring programme. Last November, the Treasury published the instrument in draft, along with an explanatory policy note to maximise transparency to Parliament and industry. The Treasury considers the net impact of business to be less than £5 million, so a full impact assessment has not been carried out.
In summary, this Government believe that the proposed legislation is necessary to ensure that the UK’s anti-money laundering and counterterrorist financing regime operates effectively, and that the legislation will continue to function appropriately if the UK leaves the EU without a deal or an implementation period. I hope noble Lords will join me in supporting these regulations.
Lord Kirkhope of Harrogate (Con)
My Lords, I hope it will be all right for me to intervene in this matter. As a former Member of the European Parliament, I had something to do with the fourth anti-money laundering directive and the high standards required by it and I would like to ask my noble friend one or two questions.
First, we have been obliged to operate enhanced due diligence only to countries outside the EEA, and post-Brexit we will find ourselves required to deal with all countries equally—in other words, with enhanced due diligence in all cases. I know my noble friend has just referred to the fact that many UK institutions apply this enhanced approach already and that the Financial Action Task Force recommends those standards but I would like to inquire of him as to the position regarding others. He said “most institutions” but I believe quite a considerable number do not wish to apply enhanced due diligence in countries where we are satisfied that the standards are common in the EEA and, of course, in the EU. I am rather worried about this and the obligations that it will now put on institutions which they did not have before. I think it is quite a significant change.
Secondly, I am interested in the issue of information. When payment service providers transfer funds outside the EU, there is a need for higher levels of information. I am concerned that, once again, post-Brexit we will require of UK PSPs a much greater volume of information accompanying the transfer of funds into all the EU states as well as those outside. Again, I wonder about the extent of those obligations and the amount of information. Is my noble friend aware of how that extra information should be obtained and what it would consist of? Can he advise me now or write to me if he cannot?
Thirdly, although it is not mentioned in this measure at all, I am quite curious as to whether any of these things will affect the status of so-called politically exposed persons. Currently, as noble Lords know, the term covers quite a large number of people, particularly those who have had a connection overseas—as they put it from this country—with receipts of moneys or involvement in business affairs. I wonder whether by bringing this back into this country and no longer being obliged to apply the rules that applied before, this will then recategorise or decategorise large numbers of people currently designated as PEPs and therefore subject to a very much higher level of scrutiny by our financial institutions.
I know that this is not a policy change as such but clearly this measure is a big change to obligations and procedures. There must be some costs attached and quite a lot of organisations may not be ready to carry out these new responsibilities in terms of the due diligence or, indeed, provision of information. Is my noble friend satisfied that, in the consultations and discussions that have taken place so far, our institutions are satisfied that they will be able to cope with this in the timescale we have?
Baroness Bowles of Berkhamsted (LD)
My Lords, I have a lot of common thought with the questions that the noble Lord, Lord Kirkhope, has raised, so I do not need to go into detail. I have no problem with, if you like, the way the handle has been turned on the routine adaptation but, again, the question comes of whether it was right to follow the symmetrical approach, so that immediately the EEA is in the third-country pot, or whether there could perhaps have been a transition that made it a little easier. This is not to say that in the longer term that is not the right destination, but I am not sure about a “big-bang” switchover. I, too, wonder what will happen under the Part 3 heading, “Customer Due Diligence”. Will this be another excuse for banks to extract life histories from an awful lot of people, quite a few of whom reside in this House?
Those of us who are former Members of the European Parliament ought, I suppose, to declare an interest; we tend still to have residual bank accounts and such things there. I should talk about this because the same rules apply to those bank accounts as apply to UK bank accounts. Whereas from the UK banks I get 20 pages to fill in, including, as I said, a life history and everything since the year dot, I seem to get one page from a bank in Belgium, which is under the same ruling. I would quite like to know how many of these rules are consequences of the legislation and how many are consequences of gold-plating or uncertainty among our banks. It is, in a sense, an identity thief’s charter when you have to fill in all this information, along with copies of your passport and everything else, and upload it while unsure of where it is going; or you can take it into your branch. Anything that helps with regard to that would be useful to know.
In this case, there would have been an argument for being asymmetrical for at least a little while. I regret that that opportunity was not taken, but I do not believe anything has been done that offends, as such, against what one is supposed to do under the EU withdrawal Act.
Lord Tunnicliffe (Lab)
My Lords, perhaps I should say a couple of words about where we find ourselves with these SIs. As Her Majesty’s loyal Opposition, I do not want our participation in this process to be misinterpreted in any way as an endorsement of a no-deal exit from the EU; I cannot think of a worse outcome than no deal to the chaos that we find ourselves in. However, we have to accept that, given this chaos, which has to be laid at the Government’s door, there is a real possibility that we will stumble out of the EU without a deal. While the Government seek to make contingency plans for this, by bringing in front of us what one might call no-deal instruments, we will do our duty of scrutinising them as best we can.
So far, the Government seem to have played by the rules. In my view, the rules are set out first in the European Union (Withdrawal) Act 2018, but also in paragraphs 7.1 through to 7.9—which are identical in all Explanatory Memoranda that come from the Treasury. I believe they say that there will be no new policy introduced except where necessary to achieve the transition.
I diligently read through the Explanatory Memoranda. I fear that I did not read the instruments with as much care, because, frankly, I would not know how to start. A lot of them relate to other documents and getting up-to-date, amended copies of them is difficult, so I have to judge an instrument on the basis of the Explanatory Memorandum. All it basically does is say that EEA countries become third countries. It then goes on to make the consequential changes, which involve transferring various responsibilities. In relation to this instrument in particular, it also defines high-risk countries, which I can see is important.
I have only two questions. The problem with these memoranda is that the authors know what they are talking about, whereas the reader does not know what they are reading about. Having staggered through the document, when I got to paragraph 2.12, I became exhausted. I shall read what I think is the offending passage:
“The standards are to specify what additional measures are required to be taken by credit institutions and financial institutions with branches or subsidiaries abroad, when national law outside the UK does not permit group-wide policies and procedures to be implemented that are at least as strong as those that are required by the MLRs”.
I hope that the noble Lord can make some sense of that.
My only other comment is on the tone of the memorandum—this is true of other memoranda, but I shall centre on this one for the moment. The obligation to report to EU institutions is removed, and one can see why that is perfectly logical. However, money laundering is an international crime with an enormous impact on ordinary citizens, relating particularly to terrorism and to their wealth, because of the crimes committed and their impact on the economy. It is crucial that, even if we are daft enough to leave the EU without a deal, international co-operation continues. It is not just about taking the law where it is now; it is about the law needing to develop as criminals become cleverer and do different things, and we understand more about what they are doing and what action and international co-operation are necessary.
These regulations are brought before us as no-deal SIs and will be commenced on exit day. It is clear what role they will have if it is a no-deal exit, but if a deal is done and we enter a transition period and then come to the end of it, what will happen to this statutory instrument? Will it be repealed or will it be paused? The answer to that makes a big difference to its impact. If the instrument is merely paused, we are making law for the future. If it is repealed and we essentially start from scratch as part of the negotiation in the transition period, and if sanity then reigns and we complete a deal, this SI will not matter; we will be looking at longer-term ways of managing the problems to which it relates.
Lord Young of Cookham
My Lords, I am grateful to all noble Lords who have taken part in this debate, particularly my noble friend, with his background as a Member of the European Parliament.
I agree with the noble Lord, Lord Tunnicliffe; in so far as the Government do not want no deal, we do not expect no deal, and we accept entirely that it will be much better to make progress. He also asked what would happen to this SI if, as I hope, there is a deal. The answer is that the withdrawal Act would switch it off, and it could subsequently be either reintroduced or possibly amended in the light of whatever agreement we came to during the transitional period.
Lord Tunnicliffe
Could the noble Lord define “switching off” slightly better? Is the law taken out or repealed? The term I have used is “paused”, which is rather different from “deleted”.
Lord Young of Cookham
I will read out the exact words in my brief: “Are these SIs for a no-deal scenario only? This legislation would not come into effect in March 2019 in the event of an implementation period, which will be delivered through a separate piece of legislation”—as I think I said—“through the EU (Withdrawal) Bill. It could be amended to reflect an eventual deal on the future relationship or to deal with a no-deal scenario at the end of the implementation period”. I hope that that is not too far from what I initially said. Alternatively, it could be delayed until the end of the implementation period with the possibility of repeal or amendment, depending what happens. The answer to the noble Lord’s direct question is that if there was a deal, it would be, in my words, switched off, or, in the words that I have just read out, it would not come into effect, and the withdrawal Act would be the vehicle through which that happened.
My noble friend Lord Kirkhope mentioned the burdens on banks. It is important to focus on the fact that we are talking about relationships with correspondent banks with regard to the standards he referred to. As I understand it, at the moment there are two standards: one for inter-EEA banks and the higher one for outside. In future, there will be one standard, so to some extent it will be slightly easier for the banks. As I said at the outset, in many cases, the banks already provide the higher standards—the enhanced due diligence—even where they do not have to.
In response to the points my noble friend made, which were also made by the noble Baroness, Lady Bowles, we plan to have some transitional arrangements. I hope that they will help both my noble friend and the noble Baroness. We have announced plans to grant the regulators a temporary power to phase in these new requirements that would apply to firms in a no-deal exit. This power must be exercised by the regulators in accordance with their statutory objectives, as set by FiSMA. This is a sensible measure to ensure that the firms have the time they need to adjust in an orderly way to the changes brought about by Brexit. The regulators will be seeking industry views on where it would be appropriate to phase in new requirements. However, the short answer to my noble friend is that it is no longer appropriate to treat the EEA differently, so we must either reduce all the standards or enhance them. We have chosen to enhance the standards, which, as I said, meets the higher standards that I think we would expect in any case.
So far as politically exposed persons are concerned, this statutory instrument will not affect the regime for them following exit. My noble friend was rightly concerned about the effect on business and the financial services sector. We believe that the SI will have a minimal effect on businesses across the sector. As I said when I spoke at the beginning of the debate, we consider that the net impact on businesses will be less than £5 million a year. Picking up again on the point made by my noble friend, we understand from the FCA and industry that in practice this already takes place because of the risk that firms associate with correspondent banking relationships. As such, this will lead to minimal increased costs to businesses beyond the status quo.
I turn now to payment services providers which again were mentioned by my noble friend. They will also be legally required to provide a greater volume of information to their EEA counterparts in connection with the cross-border transfer of funds than is currently the case, thus equalising the requirement across third countries. We understand from the industry that this takes place already and any changes will require firms to expand their existing IT systems to firms with which they transact.
On the information requirements concerning the electronic transfer of funds, which was a point I made earlier, HM Treasury has communicated that it will bring forward measures to give the FCA some flexibility to phase in changes to the regulatory requirements on firms under the EU withdrawal Act. They will use the powers to waive or modify some requirements to allow for a smooth transition to the post-exit regulatory regime.
Baroness Bowles of Berkhamsted
When there is a change, will there be any kind of notification for businesses and others? One of the biggest problems that, if you like, completely innocent people can experience when they are transferring money is that it gets suspended somewhere while further checks are made. That is more likely once we have gone into a third-country regime than being in the EEA. If you are transferring money for the purchase of a property or something significant for your business with a contract attached, to suddenly find that your money has been delayed by several days or a week can mean that you are in breach of the contract. Because of the particular way in which the money laundering rules operate, we are not allowed to warn people because of the risk of warning the potential money launderer. People should at least be aware that the rules are switching because that would be useful to know in order to build in some certainty. I am thinking in particular of businesses. They will have to realise that they must send money with time to spare.
Lord Young of Cookham
I am grateful to the noble Baroness. The last thing we want is to have any turbulence at the point of transition or to have legitimate transactions held up. The FCA will be consulting with the banks and payment services providers concerned, particularly in the light of the transitional arrangements that I mentioned earlier. Of course they have known for some time that these changes are on the way so that they have been able to prepare for them. However, one of the consequences of what I have just said is that there does not have to be a sudden switchover on 30 March or 1 April because the Treasury and the FCA will be introducing transitional arrangements. There will be due warning before any change takes place.
Lord Kirkhope of Harrogate
The concern of those of us who have been involved over the years with these anti-money laundering directives is the way they have been implemented in different member states. This country has always been more than diligent about making sure that any directive we have prepared in Brussels has been implemented to the nth degree over here. In doing so, the FCA has been used in a way that I believe has meant that a lot of financial institutions have gone further than was necessary not only for their own economic convenience as much as anything else but also because we in Britain have been more draconian in terms of implementation as the anti-money laundering directives have been developed, in particular this fourth one. The whole point is proportionality; in other words, it is important that we have now introduced more balance to the way in which we hope that the fourth directive will be implemented in member states. However, yet again in this country the FCA and our own financial institutions have been more than zealous in their activities.
My noble friend suggests that we should always look for higher standards, but standards should not always be equated with obligations. The obligations we have placed upon our consumers and others in this country are very strong indeed. I hope that the FCA will not use the proposed flexibility and more room to manoeuvre to go in the wrong direction because that would put us at a massive disadvantage economically.
Lord Young of Cookham
My noble friend will know that when we leave the EU, the obligation that we already have will be transferred. Thereafter, looking to the future, we will no longer be bound by EU regulation, so the opportunity for gold-plating them will not exist; we will be in control of our destiny. I am sure that my noble friend would not want in any way to water down the robust regime we have in this country to deal with money laundering, terrorist financing and the rest. We must get the balance right, which is what I think my noble friend was saying.
Lord Tunnicliffe
I intervene on that point because there is surely a contradiction. Surely when we leave the EU, the opportunity for the state to gold-plate—take present regulations and make them progressively more difficult—will be unfettered. The Minister has to convince us that, given that freedom, it will not be misused.
Lord Young of Cookham
The noble Lord has repeated what I meant to say: at the point of transfer, the existing EU regime is on our statute book. We will no longer be bound by future directives so there will not be the opportunity to gold-plate: we will be master of our own house. Having said that, I am sure that the noble Lord and my noble friend would not want in any way to water down the tough regime we have against money laundering and terrorist finance, but we will be in control of our destiny rather than having to implement directives.
Reverting to the point that the noble Baroness made, the FCA does not expect firms or regulated entities providing services within the UK’s regulatory remit and other stakeholders to prepare now to implement the changes from exit day. The FCA is engaging with the industry extensively to ensure smooth and effective implementation of the changes.
The noble Lord, Lord Tunnicliffe, asked me about paragraph 2.12 of the Explanatory Memorandum. The SI confers power on the FCA to make certain technical standards in an area in which it has technical expertise. The transfer of power is necessary because the relevant standards are currently made by the European Commission. The technical standards specify what additional anti-money laundering measures are required to be taken by banks with branches or subsidiaries abroad. These measures include policies and procedures to counter money laundering and terrorist financing, and must be at least as strong as those required by the UK money-laundering regulations.
For example, if a UK bank has a branch abroad in a country that does not have anti-money laundering and terrorist financial requirements as strict as ours, the parent bank must ensure that the branch applies measures equivalent to the UK regulations. If the law of the country in question does not permit such measures, the UK parent bank must take additional measures to handle the risk of money laundering and terrorist financing effectively. The FCA will be able to make technical standards specifying what additional measures such a parent bank may take and the minimum action needed to handle those risks.
The noble Lord also asked about high-risk third countries and how the list will be updated. On exit day, the EU high-risk country list will be onshored and form part of retained EU law. Subsequently, references to the list will be static rather than dynamic, meaning that updates that the EU makes to the list will not flow through into UK law. The list will evolve only as amended by UK law. The Sanctions and Anti-Money Laundering Act 2018 gives the UK power to maintain a list of high-risk jurisdictions in connection with which enhanced due diligence needs to be performed. Updates to the list will be made through the affirmative procedure. Therefore, they can come into force before parliamentary approval but will then cease to have effect if both Houses do not approve them within 28 days of their being made. Parliament will have scrutiny on updates, while allowing updates to be made quickly to reflect changing circumstances in third countries. There will be a significant increase on current levels of scrutiny as Parliament has no direct influence over updates to the list at the moment.
Finally, the noble Lord asked how we would co-operate with the EU on anti-money laundering efforts once the UK leaves. National anti-money laundering authorities will continue to make use of international co-operation to detect, prevent and investigate money laundering. There is a legal gateway in the regulations that provides that UK supervisory authorities must take such steps as they consider appropriate to co-operate with overseas AML authorities. Moreover, the political declaration agreed with the European Union contains a statement of mutual intent that the future relationship should cover money laundering and terrorist financing. This includes commitments to put in place arrangements for effective and swift data sharing, allowances to support law enforcement, measures for practical co-operation between law enforcement authorities and agreements to support international efforts to prevent, and fight against, money laundering and terrorist financing.
I hope that I have answered the points that noble Lords have made.
Market Abuse (Amendment) (EU Exit) Regulations 2018
(5 years, 10 months ago)
Grand CommitteeRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Lord Young of Cookham
That the Grand Committee do consider the Market Abuse (Amendment) (EU Exit) Regulations 2018.
Lord Young of Cookham (Con)
My Lords, as this instrument has been grouped I will speak also to the Credit Rating Agencies (Amendment) (EU Exit) Regulations 2019.
The Treasury has been undertaking a programme of legislation to ensure that if the UK leaves the EU without a deal or an implementation period, there continues to be a functioning legislative and regulatory regime for financial services in the UK. The Treasury is laying SIs under the EU withdrawal Act to deliver this and a number of debates on these SIs have already been undertaken in both Houses. The SIs being debated today are part of this programme.
These SIs will fix deficiencies in UK law relating to market abuse and credit rating agencies to ensure that they continue to operate effectively post exit. Both SIs will be critical to ensure good market conduct practices to protect market integrity. The approach taken in this legislation aligns with that of other SIs being laid under the EU withdrawal Act, providing continuity by maintaining existing legislation at the point of exit, but amending where necessary to ensure that it works effectively in a no-deal context.
Market abuse involves numerous illegal practices in relation to financial markets. Such practices include insider dealing, market manipulation and the unlawful disclosure of inside information. In 2016, the EU implemented the Market Abuse Regulation which empowered EU regulators and the Financial Conduct Authority in the UK, to prevent and detect market abuse. MAR aims to increase investor protection and market integrity, thereby enhancing the attractiveness of EU securities markets for capital raising.
The regulation applies to financial instruments traded on EU trading venues and worldwide market abuse that concerns these instruments. In a no-deal scenario, the UK would be outside the EEA and outside the EU’s legal, supervisory and financial regulatory framework. The MAR therefore needs to be updated to reflect this and to ensure that the provisions work properly in a no-deal scenario. These draft regulations will amend the MAR to ensure that the UK sustains an ability to prohibit market abuse and to enforce against it effectively post exit.
Firstly, the EU-wide scope of MAR will be retained by this SI, so it will continue to capture financial instruments traded on both UK and EU trading venues and global conduct that impacts these instruments. A UK and EU scope accounts for the deeply integrated relationship between the financial markets in each jurisdiction due to current arrangements in the EU. This is necessary so that the FCA can continue to investigate, prohibit and pursue cases of market abuse that relate to financial instruments in EU markets that impact on UK markets if EU regulators are unable or unwilling to do so. If this provision were not in place, the FCA would not be able to enforce against market abuse on EU trading venues, and would subsequently not be able to protect the integrity and reputation of UK markets.
Lord Deben (Con)
When my noble friend says that the FCA has the necessary resource capacity, does that mean that it could do it if it had the money and resources to do it—in other words, if it were intellectually able to do it—or does he mean that it already has the financial and staffing capacity to do it?
Lord Young of Cookham
The FCA has been consulted about these regulations. If there were a no-deal scenario, I am advised that it has the necessary resource capacity to effectively carry out its new function. Perhaps I can deal in more detail with my noble friend’s question now.
As I hope I said, the FCA has dedicated the necessary resources to account for the additional work through its 2018-19 business plan, and it will ensure that its considerable experience and technical expertise in regulating the financial services sector is reflected in its new supervisory role in relation to the CRAs.
Lord Deben
I am sorry to trouble my noble friend again but who will pay for this? The resources of the FCA are, to a large extent, raised through various kinds of costings. I declare an interest, as set out in the register, as the chairman of PIMFA. Who will pay this bit of its budget?
Lord Young of Cookham
My Lords, the chief executive of the FCA, Andrew Bailey, has said that he expects to hold FCA fees steady for a year or so, assuming that there is an implementation period. However, the FCA is able to increase its fees should it need to increase its income in the event of no deal.
Baroness Bowles of Berkhamsted (LD)
As we have got on to the subject of fees, when the credit rating agencies want to get approval from ESMA, they have to pay a fee. Therefore, will we not have a comparable fee or is it just all part of the steady-state budget?
Lord Young of Cookham
They will continue to have to pay a fee, so to that extent there will be no change, but instead of it going to ESMA, it will go to the FCA.
Furthermore, the SI will require firms to establish a legal entity in the UK to register with the FCA, in accordance with the current policy under CRAR. The SI provides the FCA with pre-exit powers so that it is able to begin registering firms, and the instrument will also establish three regimes to allow for FCA registration to smooth the transition from ESMA supervision to FCA supervision. First, UK-established CRAs will be able to convert their ESMA registration into one with the FCA through the conversion regime. Secondly, newly UK-established legal entities that are part of a group of CRAs that have a registration with ESMA will enter a temporary registration regime if they have submitted an advance application to the FCA which has not yet been processed. Thirdly, certified CRAs established outside the EU will, through the automatic certification process, be able to notify the FCA of their intention to extend certification to the UK.
The SI will also enable credit ratings issued by a CRA established in the UK, with an FCA registration, to be used for regulatory purposes in the UK. The instrument will also enable credit ratings issued before exit day by EU firms that register, or apply for registration, with the FCA to be eligible for regulatory purposes in the UK for up to a year.
In addition, in relation to appeal rights, given the new enforcement rules provided to the FCA, references to EU institutions will be replaced with the appropriate UK bodies. The Upper Tribunal will now be responsible for appeal requests that have been made as a result of an FCA decision, and the FCA’s warning and decision notice will apply to this SI also.
The Treasury has been working closely with the FCA in the drafting of these instruments. Both bodies have continuously engaged with CRAs and taken on board their views where possible when deciding on the direction of the instrument to ensure that the market is informed of its policy intention. The Treasury published the instruments in draft, along with an Explanatory Note for each, to maximise transparency to Parliament, industry and the public ahead of laying.
In summary, we believe that the proposed legislation is necessary to ensure that market abuse is effectively prohibited and credit rating agencies are appropriately supervised, and that the relevant legislation will continue to function appropriately if the UK leaves the EU without a deal or implementation period. I hope that noble Lords will join me in supporting these regulations.
Baroness Bowles of Berkhamsted
My Lords, the first thing that I noticed on page one of the draft instrument is that it says this is done not just under the EU (Withdrawal) Act but under the European Communities Act, but it does not tell us which bits are which. If you are trying to go through and ask whether this corresponds to the rules laid down in the EU (Withdrawal) Act, you do not know, because the rules under the European Communities Act are not exactly the same. I do not find any difficulty in what has been done here, and I have come across this before in other statutory instruments. But I think it would be good practice when you are doing it with powers in lots of different places if the relevant bit of the instrument were to say which the enabling power was instead of putting it in an anonymous way. But then, I am still learning about how these things are done in the UK.
I accept the points made by the Minister about what I call the symmetry point: that some bits here need to be retained, extending into EU territory, if I can put it that way, so that we know what is going on. Emissions trading is one example of that. Perhaps I should declare an interest on the register—the usual London Stock Exchange Group plc issue. How will we get information back into the UK from, for instance, the trading of UK instruments on exchanges in the EU? This is the other side of the trading obligation. If the EU says that you can trade only on recognised exchanges—there are exchanges that, for example, trade UK-listed shares—that means that, unless there is some kind of deal done, people will theoretically want to trade in the EU rather than the UK, or they will want to cut off trading in the EU so that they own the trade in the UK. We have concentrated on that when talking about trading obligations; we have not talked about what happens to the information from the trading venues that remain in the EU.
I am sorry that I had not thought this out previously; it just occurred to me while the Minister was speaking. This is something for the regulators and, probably, the Government to look at as we move forward and work out what the EU is going to do in respect of exchanging information with us. The exchanges provide data to the FCA so you can see whether there is any funny business going on; it is one of the methods of detection, as you can see spikes and so forth that might indicate something strange.
Another question on symmetry is that I wonder why we have bothered, in new paragraphs 5 and 5A on page 11 of the regulation, to list all the European organisations that still have exemptions. One of the things I did from time to time in the EU, perhaps a little mischievously, was to take out the list of all the bodies that did not have to come under market abuse regulations. As I have said more than once, central banks can do things that, if anybody else did them, would be called market abuse. Generally speaking, we allow central banks to do that.
There is a general provision for certain public bodies and central banks of third countries. If the EU is now a third country, why bother to state that the Treasury can make particular exemptions for member states, the ESCB, members of a federal state, the Commission, the European Investment Bank, the European Financial Stability Facility and the European Stability Mechanism? Why not just treat them as generic public bodies? This gives the EU special treatment. Yes, one might want to prepare a list, but was this just a short cut? If we were going to compact these things down for the long term and if we were going to treat the EU as a third country, why list all EU bodies but not other third-country bodies? I am not sure that I would have put them on the face of the regulations, just for the sake of it. Those are all the issues that I wish to raise at this point.
Lord Deben
My Lords, I want to make a couple of fundamental points. First, my noble friend uses the word “equivalent”, but of course this is not equivalent. It is equivalent only in the sense that it applies to Britain; therefore, immediately, it is not the same thing. He may say that this is chopping logic, but I think that it is important for us to underline that when you take into British law what has been up to now European law, you assert your control over what happens here but you deny the fact that you had some control over what happens over the whole area. That, therefore, is not equivalent. It may be what people want, but I doubt that people who voted to leave understood the details. Indeed, none of us did until we started to go through it—what I say is not in any way insulting to either side. The fact is that this is much more complex than we thought.
The effect, which I think is important, is that we say of many of the things that we are talking about, “These institutions are international. We are still part of Europe, in the sense that we are working in this space. Therefore, we are going to try, even if we leave the European Union and even if we do so without a deal, to have arrangements that will overcome these problems”. Then my noble friend says, “We will do these things on a discretionary basis”. The problem with a discretionary basis is that it is exactly that. There will be occasions when the British Government—or the FCA—do some of these things and occasions when they do not. My concern is that, by translating where we are now into a national position and not an international position, as far as the financial services industry is concerned—I have declared my interest—we introduce a degree of randomness that we do not have at the moment. At the moment, we know when these things happen. Under the regulations, we will not know, because it will be at the discretion of the British Government to decide what things they will do in common and what things they will not.
The second thing to say is that this is entirely one-sided. We are saying that we will take these powers over the things that we have control of, but we have no deal under which we can get the information and no deal on things over which we have partial control. The noble Baroness who just spoke is absolutely right. There is a real issue about information. How will we know some of these things? If we leave the European Union and do not have information in common, there will be things that affect us which we will not know unless we have a deal which allows—and not only allows but makes—the European authorities to be in a position to tell the Government or the FCA the information that they have.
The third important thing is the whole question of who pays the bill. I am very much relieved by the Minister’s assertion that, for example, credit agencies will pay a fee, as they do at the moment, and that that fee will come to the FCA rather than to the European authorities. But it is important for him to recognise that there is already considerable unhappiness about the unaccountability of the FCA for the charges that it makes. There is no way of monitoring the charges which the FCA makes—no superior court to go to. There is a constant problem with the FCA because many of its charges seem, to those of us who represent people who have to pay them, to be unconnected either with the rise in the cost of living or indeed with the services that are provided. The difficulty with bringing everything back into this country is that there is nowhere to appeal to. The FCA is entirely under its own decision-making process, and says, “We have got enough money, but if we don’t have enough money, we’ll just raise the tariff”. I want to know from the Minister when we will have a situation in which even a group of people with whom I have no very close relationship—namely, the credit rating agencies; indeed, I have some pretty serious complaints about them—ought to have some opportunity to complain about the price that they are charged. I do not see any reference to that, nor indeed has the Minister mentioned it altogether.
My last point is, simply, that of course everything therefore comes into the hands of the Treasury. That is what happens when you nationalise what was and should be an international effort. Everything is decided by the Treasury. When people talked about “taking back control”, what that actually means here is that the Treasury takes back control. I see no opportunity for anybody outside the Treasury to be able to oversee the decisions that are made here. I say to the Minister that I am not at all sure that that is a very cheerful future. It seems that there was a great deal to be said for the much more open way in which the European Union deals with these matters. It is a much more transparent system than the system that we have in this country. One of the pieces of truth which I am afraid has been lost in the debates about Brexit is that in many areas, the European Union has been much more willing to discuss, much more open and much more transparent. We are going to lose all that, and I do not see anything in the Minister’s speech—admirable though it was—that indicates that the Treasury will open itself up to a more transparent system and provide opportunities for people to complain, argue and to know what the details are, and I see no sign that the same will happen with the FCA. This is therefore a further closure of the mechanisms of the financial world, and less transparency and openness. I am sorry that the Government have not taken this opportunity to say, “When the time comes, if we leave the European Union, we will start on a process of opening these things up”. I realise it cannot be part of this SI because it would change the nature of the legislation but I would like to hear something of the willingness of the Treasury to mimic, to some extent, the openness of the European Union, which we are now going to lose.
Lord Tunnicliffe (Lab)
My Lords, perhaps I can start by posing the same question on these two SIs as I did before. Are they no-deal only SIs or ones that will be switched off? I am entirely happy for the Minister to reference his previous reply, if that is, in fact, the reply he will give. I have tested these SIs as best I can on the basis of paragraphs 7.1 to 7.9 of the Explanatory Memorandum. Noble Lords will have read these points before as they are the same in every Explanatory Memorandum. They basically say that new policy will not be introduced except where necessary.
Largely speaking, I have found nothing to complain about. However, there were one or two areas I did not understand. I start with the Explanatory Memorandum on the first SI, on market abuse. In paragraphs 2.7 and 2.8 once again I think the problem is that the author knew what they were talking about and I do not. The first sentence of paragraph 2.8 says:
“The decision to keep instruments admitted to trading or traded on EU venues, rather than amending to a UK only scope, was taken because of the close relationship between UK and EU markets”.
I hope that the Minister might expand on that because I find the language of that paragraph, in particular, extraordinarily difficult to understand.
On international co-operation, we have had one reply. I want to press the noble Lord further. We hope that the outcome of this—no matter how badly we do it—is that we are still in this international market and therefore working together not just with the EU but with the rest of the world. As I understand it at the moment, we effectively work with the rest of the world keeping abuse regulations, in particular, up to date through the channels of the EU. How will that be replaced? The abuse regulations, in particular, clearly have to be kept up to date.
The remaining thing to say about the first SI is that it should not be in front of us because of the absurd paragraph 12.5 in the Explanatory Memorandum that says we are going to have an impact assessment but not until we have agreed the instrument. As we know, the noble Lord, Lord Bates, took some stick on that—I think that would be the right term—and your Lordships might moderate that stick by some useful comments. I do not know.
Moving on to credit rating agencies, I have a couple of questions. One is, once again, due to my failure to understand. I did get O-level English—I am not that bad, I hope. My understanding of the three bullet points in paragraph 7.12 of the Explanatory Memorandum diminished as I read through them. In particular, I have no idea what this means:
“The Automatic Certification Process will enable Certified CRAs established outside the EU to notify the FCA of their intention to extend certification to the UK. Like the Conversion Regime, these notifications must be made before exit day”.
I do not know what a “Certified CRA” is.
Finally, paragraph 7.15 covers enforcement and makes reference to criminal actions. It also makes reference to sections in FSMA, which would be a joy if I had an up-to-date copy to check them against. What I would like to be reassured about—or not if it is not true—is whether credit rating agencies are subject to the requirement to have a senior management regime where the clarity of roles is such that if a criminal prosecution was to take place, as referred to in this paragraph, that prosecution could be directed at an individual.
Lord Young of Cookham
My Lords, I am grateful to all noble Lords who have taken part in this debate and I notice that neither the noble Baroness, Lady Bowles, nor the noble Lord, Lord Tunnicliffe, have any fundamental objections to the detail of the SIs before us. I shall try to deal with the points they have made, along with those made by my noble friend. I was asked why the European Communities Act is mentioned. The answer is that the ECA powers are used to make consequential amendments to the Criminal Justice Act 1993 and the UK Market Abuse Regulation 2016. The European Communities Act is mentioned because it is the parent rather than the withdrawal Act.
My noble friend raised a number of points that go slightly wider of the mark. I would just say to him that it is a consequence of leaving the EU—like him, I campaigned to remain—that we can no longer influence what he described as “over there”. I used the word “equivalence” because what we are trying to do is make sure that if and when we do leave, the regime in this country is as equivalent as it can be to the regime when we were in the EU. Likewise, he talked about discretion. Indeed, we will not have the discretion that we have at the moment to influence what happens in the EU as a direct consequence of us having left.
Both my noble friend and the noble Baroness, Lady Bowles, raised the question of how we get information from the EU. In terms of ESMA and EU regulators co-operating and sharing information with the FCA, it will look to make use of the existing arrangements in the Financial Services and Markets Act 2000 to co-operate and share information which should be in the interests of both parties. We hope that that will continue. I was asked why we have bothered to keep paragraph 5 in the MAR SI, which is the list of EU institutions. We have omitted these exemptions from the UK MAR to achieve symmetry with the EU, but we recognise that after exit we may achieve or negotiate closer links, in which case it would be desirable to reinstate the current position if it was reciprocated or desired. I was also asked why we have exempted EU bodies under MAR. The UK and the EU markets are highly integrated, a point made by the noble Lord, Lord Tunnicliffe, and the relationship between them means that the exemptions may also be necessary for EU institutions interacting in the UK market.
My noble friend raised the issue of FCA fees. He will understand that those are not within the scope of the EU withdrawal Act powers or indeed within this statutory instrument. However, I hope that he was reassured by what I quoted from the chief executive, Andrew Bailey. He expects FCA fees to remain steady for a year or two, assuming that there is an implementation period.
The noble Lord, Lord Tunnicliffe, asked why the scope of this SI covers financial instruments in both UK and EU trading venues. I think the answer is that there is a very close relationship between the UK and EU markets and the scope provided by this SI ensures that the FCA will continue to have the ability to investigate and pursue cases of market abuse related to financial instruments which affect UK markets. UK companies may have instruments that are quoted not in London, but in Europe. If there were abuse there, it could affect the integrity of the UK market. This means that the FCA could take action where activity in a financial instrument, which was traded on an EU venue, impacted on UK markets. We want to maintain the current levels of integrity and confidence that UK markets currently hold. The impact assessment—
Lord Tunnicliffe
There seems to be an extraterritorial competence here, which is pretty unusual in English law.
Lord Young of Cookham
We would expect the EU regulators to intervene and investigate market abuse in an EU trading venue of a UK-related instrument. We would expect it to take the lead. The provision in the SI is for what I hope is the unlikely event that they decide for whatever reason not to intervene, but that we feel there is a need to investigate market abuse because it is having an impact on UK markets. That is why that particular power is as I have said.
To return to the lack of an impact assessment, we did ship a bit of water yesterday. We recognise the importance of having impact assessments available to inform these debates. Treasury Ministers are doing everything they can to make these available as soon as possible. They are in discussions with the Regulatory Policy Committee to improve the impact assessments and enable them to complete their review of them. We hope to publish the relevant impact assessment next week.
Lord Tunnicliffe
I omitted to congratulate the noble Lord on getting out an impact assessment on the final SI—the credit rating business. Because it came out, I was foolish enough to read it; it is interesting that the numbers showed a cost to the industry of £11.4 million. I did not really understand what that meant—whether the figure was big or little. It is obviously £11.4 million, but do these people make hundreds and thousands of millions of pounds such that it is nothing or will it be a significant cost to them?
Lord Young of Cookham
It is a very good question, and the answer is that we do not have the exact information as to the exact turnover or number of people employed in the CRAs. I will make further inquiries and see if I can shed some light on that. I might get some in-flight refuelling.
Lord Deben
When my noble friend sheds some light on that, would he be kind enough to explain something which is often hidden in this? I do not quite understand why there is an additional cost if we are to do the same thing, only locally, because they must have been paying somewhere else. Could my noble friend make sure that we have an answer that shows which bits are, if you like, real additions and which are a replacement for somewhere else? That is all I want to know.
Lord Young of Cookham
Seeing whether one can net it off is a very good question, and I will see whether we can do that—I probably cannot do it on my feet.
To revert to the point made by the noble Lord, Lord Tunnicliffe, about how the £11.4 million cost to the credit rating agencies relates to the size of the industry, we expect credit rating agencies to incur an estimated £10,000 per firm for changes to IT systems and £60,000 per firm for reporting requirements. This is for the five firms that the FCA expects to enter the regime. On top of that, there are familiarisation costs. Perhaps I could write to the noble Lord with more information, seeing whether we can net it off, as my noble friend has just said, by looking at what they have to pay at the moment.
The answer to the noble Lord, Lord Tunnicliffe, about the status of this SI, if there is an agreement, is the same as in the last debate. The SIs would be delayed and may then be repealed or amended as appropriate, depending on what deal we actually do.
The noble Lord asked for an explanation of the third option of paragraph 7.12 of the Explanatory Memorandum. This relates to credit rating agencies’ pre-exit applications to the FCA. All credit rating agencies will need to register with the FCA in order to establish legal entities in the UK following exit. Firms can complete this registration through the automatic certification process. Basically, if you have a credit rating agency which is located outside the EU but which has registered with an EU credit rating agency, it can apply to have that certification extended to the UK in a sort of passporting arrangement.
The noble Lord, Lord Tunnicliffe, asked about the senior management structure of credit rating agencies and whether individuals could be held responsible. It is a good question. The senior managers and certification regime does not currently apply to credit rating agencies; I think that one of the reasons is that they do not actually handle customers’ money, which of course banks and other agencies do. Regulation 22 of the SI applies Section 400 of the FiSMA, which provides that if an offence committed was with the consent or connivance of an officer of the body corporate, or due to neglect on its part, the individual as well as the corporate is guilty of an offence.
Finally, on international co-operation, the MAR SI amends Part 8 of the FiSMA to facilitate international co-operation between EU and non-EU regulators and the FCA. There are existing co-operation provisions for cases of market abuse that we will seek to rely on. Related to that, both the Treasury and the FCA will continue to co-operate internationally with the EU to facilitate identification and enforcement of market abuse, and we are confident that the FCA and HMT can continue this co-operation despite no longer being part of the EU.
Credit Rating Agencies (Amendment, etc.) (EU Exit) Regulations 2019
(5 years, 10 months ago)
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Lord Young of Cookham
That the Grand Committee do consider the Credit Rating Agencies (Amendment, etc.) (EU Exit) Regulations 2019.
Relevant document: 11th Report from the Secondary Legislation Scrutiny Committee (Sub-Committee A)
Merchant Shipping (Recognised Organisations) (Amendment) (EU Exit) Regulations 2019
(5 years, 10 months ago)
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Baroness Sugg
That the Grand Committee do consider the Merchant Shipping (Recognised Organisations) (Amendment) (EU Exit) Regulations 2019.
The Parliamentary Under-Secretary of State, Department for Transport (Baroness Sugg) (Con)
My Lords, the draft regulations that we are considering will be made under powers in the European Union (Withdrawal) Act and are needed if we leave the EU in March without a deal.
Recognised organisations, or ROs, play an important role in ensuring that ships are built and maintained to operate in compliance with standards on safety and the prevention of marine pollution. They carry out these functions on behalf of maritime nations. In the UK, the Maritime and Coastguard Agency delegates about 85% of its survey work to ROs.
Globally, the International Maritime Organization develops rules on ROs. The IMO’s Recognized Organizations Code entered into force in 2015. The code contains criteria against which ROs are approved, authorised and assessed, and gives guidance on how flag states should monitor ROs.
The EU has adopted legislation to harmonise the way in which member states implement those IMO requirements. Under EU legislation, member states may delegate the inspection and survey of ships to EU-recognised ship inspection and survey organisations, or EU ROs, by authorising them to act on their behalf. At present there are 12 EU ROs. Six of them have been authorised to act on behalf of the UK. The Maritime and Coastguard Agency intends that these six ROs would remain authorised by the UK and be recognised as UK ROs following our exit from the EU.
The MCA regularly meets UK-authorised ROs and has kept them informed of these proposals. They have raised no objection and understand why the changes are needed to ensure that the UK continues to have a functioning statue book for the approval of ROs.
EU Regulation 391/2009 and related legislation established a system for approving ROs; criteria for assessing RO performance, which is based on IMO criteria; monitoring measures and remedial measures if ROs are underperforming, including fees and penalties and, finally, the removal of RO status.
The European Union (Withdrawal) Act retains in UK law EU directly applicable legislation, such as that on ROs. It makes provision in Section 8 to correct deficiencies in such EU legislation as arises from the UK leaving the European Union. We need to amend that retained EU legislation on ROs for the legislation to function correctly in the future. The regulations will therefore amend EU Regulation 391/2009 and subsidiary EU legislation, and they will make the changes needed to adapt an EU system for ROs to one that can function as a UK system after exit. The regulations will change references to “Member State” and “the Commission” to “Secretary of State” or “the United Kingdom” where appropriate, and they will change definitions and other wording to reflect the UK’s position outside the EU. Redundant reporting requirements have been removed.
Powers have been transferred from the European Commission to the Secretary of State in relation to standards for RO performance and to keep up with changes in the minimum performance criteria for ROs, especially in the light of IMO changes. In addition, the powers of the Commission to regulate in Article 14 of Regulation 391/2009 have been transferred to the Secretary of State. This will enable the Secretary of State to legislate in order to establish criteria to measure the effectiveness of the rules, performance and procedures of ROs and criteria to determine whether an RO’s performance is an unacceptable threat to safety and the environment. The Secretary of State will also be able to legislate to make and amend rules for imposing fines and penalties and ultimately for withdrawing recognition, and rules for interpreting the minimum criteria for ROs.
The regulations include provision to ensure that ROs that are, immediately before exit day, both recognised by the EU and authorised by the UK continue to be recognised after we leave. These ROs will become recognised directly by the UK and will continue to be authorised by the UK through new agreements to be put in place with the ROs before exit day. That will help provide ROs with certainty and clarity. Another transitional provision will ensure that ROs continue to maintain an independent quality assessment certification entity.
Commission Decision 2009/491 relates to using data from port state control inspections of ships to assess the work that ROs do. The regulations make changes to the decision to replace an EU procedure with powers to amend criteria for using port state control data. Article 8(1) of Regulation 391/2009 provides for assessment of ROs every two years by the Commission and the member state that put forward an RO for approval. The regulations retain the two-yearly assessment but transfer responsibility for it to the Secretary of State.
The regulations also transfer powers to review fines and penalties from the European Court to the UK courts by way of a statutory appeals procedure. Finally, they remove provisions relating to derogation from certain provisions of international law in Article 13(2) of Regulation 391/2009 and Commission Implementing Regulation 1355/2014. In the case of the latter, this has been revoked. The EU introduced these derogations on the basis that they appeared to be incompatible with EU law. We do not regard the provisions as incompatible with UK law and, as the UK did not lodge objections to them in the IMO, any attempt to derogate from them would be in breach of the UK’s international law obligations.
These regulations will be accompanied by Merchant Shipping Notice 1672. This provides information to the industry on the standards that ROs apply and on requirements for recognising, authorising and monitoring ROs. This shipping notice has been drafted and will be issued once the SI has been passed.
I should also mention Directive 2009/15, which governs the relationship between flag states and ROs. The UK implemented the directive administratively through formal agreements between the MCA and each RO. The directive will not be saved in UK law after exit. However, the MCA will put in place new arrangements with each RO when the regulations come into force. These will be very similar to the current arrangements between the MCA and the ROs but will reflect the changes made in these regulations.
The changes made in these regulations are needed to ensure that the law on recognising, authorising and monitoring ROs continues to function after the UK’s withdrawal from the European Union. This will enable the UK to continue to comply with its international obligations to ensure the safety of ships and the prevention of pollution. I beg to move.
Baroness Randerson (LD)
My Lords, these regulations involve ship inspections. The four sets of regulations this afternoon will lead me to repeat myself on a couple of occasions because the same themes come through in each one. All of them have safety issues at their core. The current EU-based system will be replaced with a UK-only system. As I understand it, it will continue to work within a system of international standards and the new legislation will retain existing criteria for the recognition, authorisation and monitoring of ROs: so far, so good. But ships move about and currently we have obligations to report to the EU to share information. How will this sharing happen effectively in future? Most of our ships will be sailing through EU waters at some point in their journey and many of the ships that visit our shores are EU ships. We need to know how that information is going to be shared in the future because of the safety implications.
The inspection of ships, both UK and foreign ones, is a key issue for the safety of ports. Therefore, I was quite surprised to read that there has been no formal consultation. Reasons were given on each of these SIs why there was no formal consultation. If you take the SIs together they are a pretty significant bundle of legislation and would be worth consultation in the round, if not as individual pieces of legislation.
It states in the Explanatory Memorandum that the Secretary of State will be given power to make subordinate legislation. Can the Minister clarify whether this will be an affirmative or a negative procedure?
Finally, the list of ROs we have been provided with makes for interesting reading. I do not in any way pretend to be an expert in these issues. Can the Minister enlighten me as to how this list is drawn up? How is this rather disparate list of organisations there and how do we change it? What are the criteria for changing it if we want to? I would be grateful for some information on that.
Lord Tunnicliffe (Lab)
I thank the Minister for presenting this instrument. I have no great problem with it but I lack a little bit of understanding. The first thing I would like to be clear on is whether this is a no-deal instrument, that is, something that needs to be processed quickly because it is necessary if we fall out of the EU without a deal—which in my view and that of my party would be the least satisfactory outcome. I can see that the instrument does its work in the event of a no deal; I am not so clear about what happens to it if there is a deal. Will it be repealed or will it be paused? Will it continue to exist? The Minister may find it efficient to answer that question referring to all four statutory instruments if it is the same answer.
Baroness Sugg
I thank noble Lords for their consideration of these regulations. As I said, they will ensure continuity for ROs and the shipping companies which rely on their services and make no changes to the way in which ROs operate or to their relationship with the MCA.
The noble Baroness, Lady Randerson, raised safety, which is of course a priority. We are currently a member of the European Maritime Safety Agency. We want to continue our close working with the EMSA after we leave the EU. The political declaration recognised that the EMSA and the MCA should continue to share data in a future relationship. In the event of no deal, we still hope to continue that relationship, but it will be subject to negotiations. Where the MCA may need to cover a role currently played by the EMSA, it has contingency plans for doing so.
No formal consultation on this statutory instrument was done, as the noble Baroness pointed out. The MCA has a close working relationship with the ROs. It authorises them, meets them regularly and has discussed with them the content of the instrument. As I said, they recognise that the aim of the regulations is to maintain the status quo as far as possible. The regulations will have no impact on the working of ports. We have had no specific discussion with ports on the regulations, but obviously we do that as part of our wider work on EU exit.
On the Secretary of State’s powers, secondary legislation that amends the criteria that ROs must meet to continue to enjoy recognition, the system of fines and periodic penalty payments or any withdrawal of recognition is subject to the affirmative procedure. Secondary legislation on interpreting the criteria for assessing RO performance and the effectiveness of their rules or amending the criteria for use of port state control inspection data for assessing unacceptable levels of performance by ROs is subject to the negative resolution procedure.
On how we approve ROs, the list is slightly disparate, as the noble Baroness pointed out—I had not seen it myself before getting to know these regulations. There is an EU list and, from it, the UK recognises six ROs. The MCA enters a formal agreement with each RO acting on behalf of the UK and assesses those ROs periodically. It is a long-standing list, but it is possible to change it and if people wish to apply, we will certainly consider that.
In response to the points made by the noble Lord, Lord Tunnicliffe, this applies to all the regulations we will be discussing today and perhaps tomorrow. It is a no-deal SI. During an implementation period, the SI will not be needed because the withdrawal agreement provides that EU law should continue to have the same effect in the UK as in the EU during that period. The EU withdrawal agreement Bill will be introduced as soon as possible and, as we set out in the White Paper, we will make provision to defer, revoke or amend any SIs that are made but then not needed during an implementation period if a deal is secured. The same applies to the rest of the SIs that we will be discussing.
On the relationship between recognised organisations, the EU and the IMO, we have authorised six ROs which are recognised by the EU. The relationship between the UK and the ROs will not change and there will be no change in the relationship between the UK and the IMO. The ROs will carry out the same inspections and surveys on UK ships as they do now. The only changes are to reflect the UK’s status outside the EU; for example, the EU will take over responsibility for monitoring and assessing its authorised ROs.
The IMO sets the global framework for maritime safety and security and the prevention of marine and atmospheric pollution by ships. Its recognised organisation code contains those criteria and the UK is a signatory to the IMO convention that implemented the RO code. The difference, I suppose, is that, while the relationship between the UK and IMO will stay the same, there will not be that relationship with the EU; at the moment, ROs are approved or recognised at EU level. Since the IMO conventions came in, the EU has harmonised them; we will be removing ourselves from that harmonisation and recognising ROs ourselves. After exit, decisions on recognition of new ROs and evaluations of the performance of existing ROs, which were previously made by the EU, will now be made by the Secretary of State. There will be no change in our relationship with the IMO.
I hope that I have answered all the questions; if not, I will follow up in writing.
Ship and Port Security (Amendment etc.) (EU Exit) Regulations 2018
(5 years, 10 months ago)
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Baroness Sugg
That the Grand Committee do consider the Ship and Port Security (Amendment etc.) (EU Exit) Regulations 2018.
The Parliamentary Under-Secretary of State, Department for Transport (Baroness Sugg) (Con)
My Lords, these draft regulations will be made under the powers conferred by the European Union (Withdrawal) Act 2018. The regulations make appropriate amendments to ship and port security legislation following the conversion of EU Regulation 725/2004 into domestic law on exit day.
The UK maritime sector is thriving. We are one of the largest flag states, have one of the largest ports industries and attract significant investment. We lead the world in many areas of maritime business services, education and research. These regulations will make necessary and appropriate amendments to existing ship and port security legislation so that the current regime of protective security on board ships and at UK ports continues to operate effectively following the United Kingdom’s withdrawal from the European Union.
International agreements and European legislation form the bedrock of the well-established regime of ship and port security which currently exists in the UK. The UK is a contracting party to the IMO’s Safety of Life at Sea (SOLAS) Convention. In response to the perceived threats to ships and port facilities following 9/11, the International Ship and Port Facility Security (ISPS) code was adopted under SOLAS. This code established a range of protective security measures which are required to be put into practice on ships and at ports, to protect vital infrastructure and people from acts of terrorism or violence.
The code is set out in two parts. Part A includes a number of mandatory provisions for signature states. Part B contains measures which were intended as guidance for states to consider implementing, aimed at enhancing the security of ships and port facilities. In 2004 the convention and code were given a basis in EU law by Regulation (EC) 725/2004. This regulation provided for the harmonised implementation of the convention and ISPS code both within and across EU member states. It made the provisions of Part A and certain specific elements of Part B of the ISPS code mandatory for implementation within all EU member states. That EU regulation is directly applicable in UK law but was further implemented, in so far as it was necessary to do so, in domestic legislation by the Ship and Port Facility (Security) Regulations 2004.
The 2005 ports security directive further complements the security measures introduced by the EU regulation by expanding the area of a port which is subject to a protective security regime. The directive was transposed into UK law by the Port Security Regulations 2009 and 33 separate designation orders which define the boundaries of ports across the UK. The existing legislative regime ensures that proportionate security measures are in place on board ships and at the UK’s maritime ports.
On withdrawal day, the regulation will be converted into UK legislation. To ensure that the retained EU law functions effectively, a number of changes are required to the text of Regulation (EC) 725/2004, the Ship and Port Facility (Security) Regulations 2004 and the Port Security Regulations 2009. The changes are being made to ensure that the existing regulatory framework of ship and port security continues to operate. The policy behind these changes is that in the UK there should be no practical change to, or noticeable impact on, how the industry operates an effective protective security regime on a day-to-day basis.
Most of the changes which are being made are relatively minor. Some involve the restatement of retained EU law in a clearer or more accessible way to make it fit for purpose within domestic legislation. These draft regulations remove from the legislation inappropriate language or phrases, such as “Member State” or “the Commission”, which will no longer be appropriate, and they also remove obligations placed on the UK by virtue of it being a member of the EU—for example, to provide particular information to the Commission.
The draft regulations also revoke Regulation (EC) 324/2008 which established procedures across the EU for the Commission to conduct inspections of UK ships and ports. Inspections of UK ships and ports by Commission inspectors will be neither required nor appropriate following EU withdrawal, when the Department for Transport and the Maritime and Coastguard Agency will continue to deliver the well-established programme of ship and port inspections to ensure that the required security standards are being met.
The draft regulations also include provision for three more detailed but equally necessary corrections to the existing legislation. First, they amend Article 3 of Regulation (EC) 725/2004 in relation to domestic vessels. The amendment remedies a deficiency and makes the law more accessible by including a specific reference to the categories of domestic vessel that fall within the scope of the EU regulation. This does not alter or impact on current administrative practice or the categories of domestic vessel to which the legislation currently applies or on how the vessels are required to comply with this legislation.
Secondly, the draft SI includes a provision to enable the direct application of future amendments made to the ISPS code. That will allow the legislation to keep in step with future changes and ensure that the UK meets its international obligations. The current text of Regulation (EC) 725/2004 already allows for the legislation to remain in step with any changes that are made at the international level to SOLAS and the ISPS code. The purpose of the amendments made by this draft SI is to allow the retained EU legislation to continue to remain in step with the UK legal framework.
However, as part of this provision, the Secretary of State will have the power to exclude any such change relating to international shipping by the making of regulations—something that is currently done by the Commission—if it is determined that there is a manifest risk that implementation would lower the standards of the UK’s maritime security regime. Any future regulations made in this regard by the Secretary of State would be subject to the negative parliamentary procedure.
Finally, the Port Security Regulations 2009 contain references to Section 2(2) of the European Communities Act 1972, which will no longer be in force on exit day. To fix this deficiency in the legislation and to ensure that the Secretary of State can continue under that legislation to define or amend the boundaries of particular ports, these draft regulations rely on powers within the European Union (Withdrawal) Act to confer on the Secretary of State powers to continue to update or amend that existing suite of legislation. This power would be used, for example, when a port boundary changed or new ports came into existence.
The amendments made to the Port Security Regulations 2009 will ensure that the Secretary of State can continue to discharge all his statutory duties. Not conferring this power on the Secretary of State would effectively create a situation where the existing legislative regime would be frozen in time and any required updates could not be made because the current legislation only provides for this to be done through an order made under Section 2(2) of the 1972 Act.
The power to make regulations conferred on the Secretary of State in the draft regulation will maintain the effectiveness and operability of the current ship and port security legislation following EU withdrawal. The power will ensure the continued discharge of the Secretary of State’s existing obligations as set out in the Port Security Regulations 2009, and will be exercisable in the same manner and subject to the same conditions as prior to EU withdrawal.
Changes which are made to this legislation will be subject to the negative parliamentary procedure as they were before when the changes were made under Section 2(2) of the European Communities Act 1972. The consequence of not having this power is that the existing port security regime will cease to operate effectively following EU withdrawal, which could present risks to security.
In conclusion, the draft regulations are intended to make changes which will ensure that the current legislative regime for ships and ports is able to operate effectively and continues to meet the UK’s maritime security requirements following EU withdrawal. I beg to move.
Baroness Randerson (LD)
I thank the Minister for her explanation. The EU regulations behind this provide a standardised regime of protective security for port facilities and the surrounding area, and this SI also covers inspections. It replaces the EU system with a UK system that mirrors the EU one, and in doing so, there is one crucial change: it removes the obligation to provide information to the European Commission. I am sorry to ask again: how will we co-ordinate and share information with the Commission in the future?
The SI says that the MCA will continue to carry out inspections to ensure that ships and ports meet required security standards. Can the Minister say who will set down those standards and require them in the future and how we will align them internationally so that our standards are as good as those of the rest of the world? Since this is an attempt to mirror the EU, how will the Government adapt to changes that the EU makes so that we do not put ourselves at a disadvantage with our current EU partners?
Can the Minister also say what liaison there has been with the devolved Administrations on this? It is not clear from the Explanatory Memorandum. The devolved Administrations have an important role in port administration. We do not want to confuse people totally; the idea that you would have a very different set of standards if you put into the port of Holyhead rather than the port of Liverpool would be deeply unsatisfactory and confusing. The SI gives the Secretary of State power to amend port security regulations by the negative procedure, and the Minister drew attention to that. However, perhaps I did not hear correctly or fully; could she say why the affirmative procedure is not being considered?
The EU can block amendments to the ISPS code if they might lower maritime security standards. This power is now given, in this SI, to the Secretary of State, once again by the negative procedure. We do not want to see lower standards. I am concerned about the danger that we might get out of step with the EU on the highest standards which are set by it and that we might do so simply by default. That is because the Secretary of State would exercise the power through the negative procedure and we would not be given the opportunity to scrutinise it.
This is a serious issue as regards safety and it is important that we are given the opportunity to scrutinise it. I personally would prefer the affirmative procedure, but I will listen carefully to what the Minister has to say.
Lord Tunnicliffe (Lab)
My Lords, once again I thank the noble Baroness for introducing this instrument. I have subjected it to my standard test: is it the minimum policy change required? I also have to admit that I did not understand the overall framework, but that is my fault. I know about aeroplanes and trains, but the sea is a mystery to me. What I have picked up from the instrument is that SOLAS with its ISPS code is an international convention. Is it the case that the international body hands down specifications and requirements that it has previously put through the EU and in the future will make directly to the UK? Are such directions and recommendations mandatory for the UK except as excepted by this instrument?
Baroness Sugg
My Lords, I thank noble Lords once again for their consideration. As with all of these SIs, our EU exit is not going to mean that co-operation with EU member states on matters of national security will cease. We will continue to work with the EU and our international partners where appropriate on all matters relating to maritime security.
As regards the devolved Administrations, port and ship security is not a devolved matter, but as the noble Baroness has pointed out, there are ports across the United Kingdom so we have engaged with the devolved authorities in Scotland, Wales and Northern Ireland on the proposals in this draft SI and they have been supportive of them.
I turn now to SOLAS and the ISPS code. The UK is a contracting party to the Safety of Life at Sea convention, which is an international convention. The International Ship and Port Facility Security code was adopted under SOLAS. That code has established a range of protective security measures which should be put into practice at ports. Following that, the EU regulation made the provisions in Part A and specific elements in Part B mandatory for all member states, which I went through in my opening speech. Following the conversion of EU law into UK law, they will be directly applicable.
Lord Tunnicliffe
Perhaps I may ask a question as a point of clarity. I have some trouble in seeing what the role of the EU is now if SOLAS hands down a set of rules and we are a contracting state. Are we not required to do that by virtue of being a contracting state whether the EU is there or not? The only role that emerges from this is the ability to reject a rule if it comes under the conditions set out. That was previously exercised by the EU but in future it will be exercised by the Secretary of State. I do not see, other than in a role of co-operation, what the EU’s role is now. I do not see what “taking it away” actually means.
Baroness Sugg
I suppose the role of the EU is that we currently implement the requirements under EU law. Following the withdrawal Act we will implement them under UK law rather than EU regulation. The standards will stay the same: the international standards will automatically go through legislation. We will accept the standards apart from the exception that the noble Lord pointed out.
The noble Baroness asked about negative and affirmative procedures. The negative one is appropriate because the regulations can be made only to prevent standards of security being lowered by the international amendment.
The existing legislative regime for the security of ships in ports, as I said, was based on UK regulation and the EU regulation-implemented parts of ISPS and the SOLAS convention. After withdrawal, all existing European legislation that is currently applicable will become part of the UK statute book.
I hope that I have managed to address the points made by noble Lords but if have failed to do so I will follow up in writing. Perhaps I will follow up in writing just to set out more clearly the exact relationship between the SOLAS convention and the UK and further to clarify the negative procedure point.
The current legislative and protective security regimes operate effectively and the draft regulations will simply make appropriate changes that will become the retained suite of protective ship and port security legislation when the UK exits the European Union. I hope that noble Lords will join me in supporting these regulations. I beg to move.
Merchant Shipping and Other Transport (Environmental Protection) (Amendment) (EU Exit) Regulations 2018
(5 years, 10 months ago)
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Baroness Sugg
That the Grand Committee do consider the Merchant Shipping and Other Transport (Environmental Protection) (Amendment) (EU Exit) Regulations 2018.
The Parliamentary Under-Secretary of State, Department for Transport (Baroness Sugg) (Con)
My Lords, as well as speaking to these regulations, if it is convenient I will speak also to the draft Ship Recycling (Facilities and Requirements for Hazardous Materials on Ships) (Amendment) (EU Exit) Regulations 2019. The regulations are made, for the most part, under the EU withdrawal Act. The Act retains EU-derived legislation in UK law. It also makes provision in Section 8 to correct deficiencies in such EU-derived legislation that arise from the UK leaving the EU.
There are some changes made under Section 2(2) of the European Communities Act. These update references to an EU directive on sulphur emissions from ships and correct an out-of-date reference to the EEA agreement in the Transport and Works Act 1992.
Turning to the regulations themselves, both make changes to ensure that legislation on environmental pollution continues to work after we leave the European Union. The environmental protection regulation makes changes in three areas of legislation on transport and the environment—specifically to legislation on air pollution controlling sulphur dioxide emissions from ships; legislation on substances used to prevent the fouling of ships’ hulls, and transport and works legislation in relation to environmental impact assessment.
The amendments in these regulations are technical. There are no policy changes, and there is no reduction in the environmental standards or, indeed, the obligations to which the UK is currently subject. The regulations will change references to “Member State” and “the Commission” to “Secretary of State” or “the United Kingdom” where appropriate. The regulations change definitions and other wording to reflect the UK’s position outside the EU.
I turn to the control of sulphur emissions from ships. Noble Lords will be aware of the importance of action on air pollution. The UK supports the IMO’s new global limit for sulphur emissions from ships, which comes into force on 1 January 2020. The UK has recently published a clean air strategy, which aims to cut pollutant emissions in half by 2030 and my department has also established the Clean Maritime Council, where key stakeholders are encouraging the development of green technology. We are planning to publish a clean maritime plan this spring, which aims to reduce both pollutant and greenhouse gases from shipping.
These regulations make changes to The Merchant Shipping (Prevention of Air Pollution from Ships) Regulations 2008 and Commission Implementing Decision 2015/253. The changes are made only to ensure that the legislation remains operable, and the regulations will ensure that the UK continues to recognise methods of abating emissions of airborne pollutants that are approved by EU member states. They also ensure that recreational and pleasure craft will continue to benefit from certain exemptions in respect of diesel engines.
Baroness Randerson (LD)
My Lords, we have been getting on rather swimmingly with these SIs, but I regret to say that I have rather more to say about these two, particularly the ship recycling regulations.
I start with the environmental protection SI. This is a very important piece of regulation because of the extremely high levels of air pollution from shipping. It deals with the sulphur content of fuels and anti-fouling systems, which can also be seriously environmentally damaging. It also deals with the frequency of sampling and the reporting procedures.
There is a complex description of the legal application of these powers. I am concerned that there might be a danger of the constituent Administrations of the UK getting out of step and of ship operators getting confused if the requirements vary between the UK countries in a way that they do not at the moment because of the streamlined EU system. Therefore, there is a concern that, once we leave the EU, the legislation will diverge.
Paragraph 7.3 of the Explanatory Memorandum says that where a UK project might have a significant environmental effect on an EU member state, we will continue to consult that country before granting permission. Can I please have clarification from the Minister that the consultation will be with the individual EU country and not with the European Commission?
Paragraph 7.6 refers to removing redundant references to EU databases and, specifically, SafeSeaNet, which we will no longer have access to, while ensuring that its role is replicated in the UK. How do we replicate it if we do not have access to it? How can you replicate it when we do not have access to the database? What are we replacing it with and what are the resource implications of doing that work ourselves and simply repeating what the EU is already doing? The Explanatory Memorandum states that the Welsh Government were consulted, but what about the other devolved Administrations, because some, but not all, of the provisions in the SI apply to them?
Underlying all this is the fact that we are leaving the world-leading standards set by the EU and a new limit will come into force in 2020—the Minister referred to that. It will apply to ships using the North Sea and the Channel. Will that still apply to us after we leave the EU—do the Government intend that it should apply to us? Crucially, what will happen about the Irish Sea? As I understand it, it does not apply at the moment in the Irish Sea. Will the Irish Sea be subject to the new limits? Obviously, it is a sensitive area where ships from Northern Ireland and the Republic of Ireland are sailing in effectively the same waters. Will they be subject to a different regulatory regime?
Turning to ship recycling, the EU regulation that the SI deals with is the basis for improving environmental and safety standards for recycling EU-flagged ships and has led to the creation of an approved European list. This is a very important SI, because the facilities on the list can be anywhere in the world. There are seriously environmentally damaging ship-recycling facilities in some parts of the world. The procedures they use are unsafe, with a major impact on human health. Inspecting and approving them to create a European list is an onerous and complex business with a massive cost. Are the Government seriously saying that we will repeat that inspection process, with all the onerous and costly implications?
The EU regulation also restricts what hazardous materials—for example, asbestos and PCBs—can be installed on ships and ensures that they have an inventory of such materials. The UK’s MCA, Health and Safety Executive and the Environmental Protection Agency deal with the country concerned about this. As usual in this legislation, the status quo will continue to apply at first, but this SI is different from the others we have considered this afternoon. This is not just the usual expensive mirroring of what already exists in the EU. It will be very expensive, but it is not a mirroring.
This is more than just establishing a procedure for updating, although that it is important, because this is an area where standards change and, fortunately, standards have been rising. Paragraph 7.3 of the Explanatory Memorandum specifically says that, although:
“Initially, the UK list will be similar”,
in the name of giving,
“UK flagged ships the widest choice … It establishes a new procedure allowing ship recycling facilities worldwide to apply for inclusion”.
So it is clear; there is planned divergence here and absolutely no guarantee on maintenance of standards. This is one of the first glimmers of what some hardline Brexiteers have been urging: a new world where standards are lower, and costs are lower as a result.
Lord Tunnicliffe (Lab)
My Lords, I thank the Minister for presenting these two SIs. I also thank the noble Baroness, Lady Randerson, for her points. She has stolen most of my best lines and, in light of the hour, I will try not to be too repetitive. I hasten to add that I am very happy to hear all her questions answered but please disassociate me from anything to do with Northern Ireland.
We seem to be in a rather different position here. On virtually everything we have discussed today there has been a pretty sound EU position that we are just trying to transfer across. My sense is that we do not have a pretty sound EU position when it comes to these instruments. Therefore, how we manage the future and how these instruments impact on the future are extremely important.
I will be brief. The first instrument covers sulphur standards, anti-fouling and environmental impact standards. The overwhelming, important one is the issue of sulphur dioxide pollution. I hope the noble Baroness can give some response. It seems to me that it has to be international. When the gas is released, it will go where it goes. Therefore, we need to understand how decisions about the concentration of sulphur in fuels are managed, the areas of the world that are covered and the testing techniques—particularly the position about the Irish Sea, which seems to be an anomaly. There is also the matter of agreeing standardisations for abatement technologies for sulphur dioxide. Once again, those sorts of issues really need international agreement. Can the Minister give me some feel of the situation we will be left in if we leave the EU without an agreement and this instrument becomes applicable?
In passing, I would also like to mention SafeSeaNet. It seemed a wacky sort of title so I googled it. It is clearly a very important facility and without it it is difficult to see how we can discharge the responsibilities we take over, particularly in sulphur standards.
The anti-fouling part of this seems relatively straightforward and I do not have any questions on it. I am not entirely convinced that the environmental impact assessment is a consequence of leaving the EU. It seems to me that the Government are tidying up pieces of domestic legislation and perhaps smuggling it through. I am sure I have misunderstood that but I feel a duty to ask the question.
Finally, the points raised by the noble Baroness, Lady Randerson, on ship recycling are very important. In the past this has been a dreadful area of activity in the world. The EU initiative is a commendable step forward in tidying it up. It is very important to understand how we will be involved in the future. I hope the Minister will be able to assure us that we will go into this new era—if we are forced into it—on the front foot to get these standards improved and, what is more, to continue to participate with other countries to make sure they are international standards so the whole world can share the benefits of proper controls.
Baroness Sugg
I thank noble Lords for considering these draft regulations. I will attempt to answer as many questions as I am able to and will follow up in writing if I do not get to any. I absolutely agree with the noble Lord’s point that these environmental measures are needed across international boundaries. That is why we are seeing international action through the IMO, such as the higher global sulphur standard, which comes into force next year. We will continue to play a leading role in the IMO in the development of those environmental measures and also continue to co-operate with other countries on the enforcement of such measures through our membership of the Paris MoU on port state control.
We support the new global limit on the sulphur content of fuel of 0.5% on 1 January 2020. The UK, along with other states, is assisting the IMO to develop best-practice guidelines for ship owners and operators and all suppliers. Since 2015, ships inside the emissions control area—the North Sea and including the English Channel but not the Irish Sea—have been limited to 0.1% sulphur unless they use an exhaust gas cleaning system or alternative fuel. Under our recent clean air strategy, we are considering options for extending that current emission control area in the North Sea to other UK waters such as the Irish Sea. The UK’s position on sulphur standards, and the inspection regime, will not be changed by EU exit. We have committed to taking further action on that in the clean air strategy.
The standards and testing regimes for the future are agreed at the IMO—again, that will not change after we leave the EU. Other organisations such as fuel suppliers and the International Organization for Standardization will be involved in those discussions—as will the UK. There are separate EU targets for the number of ship inspections and fuel samples which member states need to take annually, and which we have retained.
The instrument provides for the continued recognition of the emission abatement methods approved by EU member states, and most equipment is approved at the IMO level. Member states are allowed to trial new and innovative technology which does not have the formal approval of the IMO; in practice, we expect most systems of emission abatement technology to be built to meet the IMO type requirements, which we would follow.
I note the question from the noble Baroness, Lady Randerson, about whether the consultation would be with member states or the Commission. The consultation mentioned in paragraph 7.3 relates to the consultation on the environmental impact of projects being consented under the Transport and Works Act, and I confirm that the requirement, where a project could impact another member state, is to consult with the appropriate authorities and bodies of the individual countries concerned, not the Commission.
On SafeSeaNet, which both the noble Lord and the noble Baroness referred to, we will continue to share data. Through the Paris MoU THETIS system, countries share data from port inspections. Currently, we send data to THETIS through the EMSA SafeSeaNet system. In a no-deal scenario, the MCA will simply send the data directly to the THETIS system. That is why we have removed references to SafeSeaNet from the regulations. We will absolutely continue to share IMO compliance information through THETIS.
The noble Lord referred to environmental impact assessments, which are outside the EU withdrawal Act. I will say a few more words about that in an effort to explain our actions. The two minor amendments being made under powers other than the EU withdrawal Act are under Section 2(2) of the European Communities Act, and the amendment to Section 6(A) of the Transport and Works Act 1992. That updates an out-of-date reference to the EEA agreement, and we need to make that correction now using the power under the ECA Act before it is repealed under the EU withdrawal Act, so these are consequential amendments.
Consultation is slightly different with the Welsh and other devolved Governments. That is because some of the regulations in the environmental protection regulations amend the transport and works legislation. That was originally made in 1992 and is applicable to England and Wales only and operates in areas which are now devolved. As such, we have been required to consult with the Welsh Government. The rest of the instrument is UK-wide but, as I said before, we are in regular contact with the Scottish Government on all SIs, including this one.
On the new UK list for recycling facilities, both the European and the UK list have the same standards on accepting new facilities and have the same criteria for approval. We expect the two lists to remain closely aligned on that. It is possible that new ship recycling standards, if the EU brought them about and the UK wanted to mirror them, could be replicated through the pollution powers in the Merchant Shipping Act.
On the question of Northern Ireland, the legislation does not make any changes in relation to cross-border requirements after we leave the EU and therefore, in a backstop scenario, there would be a UK list rather than the EU list. I believe that the backstop would apply only to the land border in this situation and there would be no impact on operations there.
We think that UK shipyards will continue to be on the European list of ship recycling facilities after we leave the EU. The noble Baroness pointed out that there were other non-EU member states facilities on the list. Turkish and US yards are listed as non-EU recycling facilities.
I think that I have covered most of the points but I will go through my response and the questions raised carefully to make sure that I have covered them all. This SI is intended essentially to ensure that the legislation on environmental protection and ship recycling continues to work effectively from day one of exit, and I hope that it will receive noble Lords’ support.
Baroness Randerson
I thank the noble Baroness for her comments. I will read what she has said very carefully but I remain concerned and I think I should warn her that I might raise these issues again when the regulations go before the House for approval.
Baroness Sugg
I thank the noble Baroness for her comments. As I said, I will go through the points raised in more detail and will write to her in an attempt to provide reassurance.
Ship Recycling (Facilities and Requirements for Hazardous Materials on Ships) (Amendment) (EU Exit) Regulations 2019
(5 years, 10 months ago)
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Baroness Sugg
That the Grand Committee do consider the Ship Recycling (Facilities and Requirements for Hazardous Materials on Ships) (Amendment) (EU Exit) Regulations 2019.
House of Lords
(5 years, 10 months ago)
Lords ChamberRead Full debate Read Hansard Text
Shop Workers: Protection
(5 years, 10 months ago)
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Baroness Kennedy of Cradley
To ask Her Majesty’s Government what assessment they have made of the protections in place to prevent shop workers from being verbally abused, threatened with violence, or attacked.
The Minister of State, Home Office (Baroness Williams of Trafford) (Con)
My Lords, everyone has the right to feel safe at work. I have enormous sympathy for shop workers, who can face intimidation, threats and in some cases violence. I can confirm that, to understand this issue in more detail, the Government will take forward a call for evidence on violence and abuse towards shop workers. This is intended to help us fully understand the problem and look at all options for addressing it.
Baroness Kennedy of Cradley (Lab)
My Lords, it is a depressing fact that too many shop workers suffer physical assault. USDAW, the shop workers’ union, says that shop workers are on the receiving end of 230 assaults each day. The recent measures announced by the honourable Member for Louth and Horncastle, such as the call for evidence, are a step in the right direction. However, they fall short in failing to recognise the need for specific legislation to make it an offence to assault a worker enforcing the new age-related restrictions on acid and knives, which are set to come into force as a result of the Offensive Weapons Bill. Will the Minister explain why the Government will not accept that new legislation is needed, in spite of the concerns expressed by many organisations and on all sides of this House? Will she agree to meet USDAW and other organisations representing the retail sector, ahead of Report on the Offensive Weapons Bill in this House, to discuss the issue in detail?
Baroness Williams of Trafford
My Lords, I am very happy to meet USDAW, which I fully expected might be one of the things I would do during the passage of the Offensive Weapons Bill. The noble Baroness will know that attacking a person serving the public is already an aggravating factor in sentencing guidelines. The Minister for Crime, Safeguarding and Vulnerability will be discussing the way forward on the call for evidence with the national retail crime steering group. We do not have a closed mind on a way forward and I look forward to meeting USDAW and hearing its concerns about this serious matter.
Lord Paddick (LD)
My Lords, when shop workers enforce the law—for example, on the sale of age-restricted items—they are acting as law-enforcement officers. Does the Minister think that when shop workers perform these duties, they should have similar legal protections to those afforded to other law enforcers?
Baroness Williams of Trafford
I do not agree that they are acting as law-enforcement officers. One could take that to its ultimate conclusion and say that everyone who upholds the law is acting as a law-enforcement officer. They are simply saying that, for example, the sale of alcohol, tobacco and, in future, corrosive substances, to underage people is against the law. As I said to the noble Baroness, Lady Kennedy of Cradley, the call for evidence will bottom out exactly what is needed in the future. Nobody wants to see shop workers or any workers who deal with the public being abused in any way. I look forward to a constructive way forward on this.
Lord Kennedy of Southwark (Lab Co-op)
My Lords, the Offensive Weapons Bill would rightly ban the sale of knives, bladed items and acids to under-18s, with penalties for those who break the law and sell those items. In addition to USDAW, the British Retail Consortium, the Co-op, the Association of Convenience Stores and others are supporting calls to protect shop workers who uphold the law via a specific offence for those who threaten shop workers who are doing their job and upholding the law by not selling the items in question. Why is it too much to ask the Government to protect shop workers at the same time as creating new laws and offences for selling such items?
Baroness Williams of Trafford
My Lords, I fully support what the noble Lord says about protecting shop workers. A number of laws to protect them are already in place; we need to explore this issue more to see what we can add to that. We are funding targeted communications going forward and refreshing the national retail crime steering group, which the Minister got up and running in December. As I said, there is no excuse for shop workers or anyone working with and serving the public being abused in any way.
The Earl of Listowel (CB)
My Lords, while I recognise the very real concerns of shop workers and their calls for stronger sanctions against those who attack them, does the Minister recognise that placing more children and young people in prison is not an effective response? If there must be a strengthening of sanctions, community sentences will protect more shop workers in the long run because they are much more effective in preventing reoffending.
Baroness Williams of Trafford
I agree with the noble Earl that putting young people in custody is not the answer every time. Obviously, magistrates have a range of sentencing powers open to them but I believe that our current work on prevention and early intervention—all the things the noble Earl talks about—is the most effective way to tackle this problem.
Baroness McIntosh of Pickering (Con)
My Lords, my noble friend will be aware that under the Licensing Act, the Home Office is consulting on a call for evidence to stop abuse against coffee shop workers and those working in other outlets at airports. Can she give a date on which the Licensing Act will apply in order to stop such abuse and disruptive passengers boarding planes, sometimes causing huge economic expense through diversions? This is a very serious matter, and we want that law to come into force before the summer season.
Baroness Williams of Trafford
As my noble friend said, the call for evidence is open; therefore, we must go through that process. I do not disagree with her about the behaviour that goes on in airports when people are intoxicated. I look forward to the results of the call for evidence.
Lord Mackenzie of Framwellgate (Non-Afl)
My Lords, I recall the outcry from certain parts of the community about the attack on civil liberties when street cameras were introduced a few years ago. Does this Question not prove the value of using modern technology in the prevention and detection of crime?
Baroness Williams of Trafford
The noble Lord is absolutely right. As legislators, we must be consistent in protecting the public from the harms of crime and other things that take place on our streets. There is a balance to be struck between civil liberties, and protecting the public and keeping criminals off our streets.
Domestic Infrastructure: Chinese Ownership
(5 years, 10 months ago)
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Baroness Anelay of St Johns
To ask Her Majesty’s Government what assessment they have made of the risks arising from Chinese ownership of technologies and platforms critical to the domestic infrastructure of the United Kingdom.
Lord Young of Cookham (Con)
My Lords, the Government take seriously any national security risks arising from the ownership of infrastructure assets and systems, and assess those risks on a case-by-case basis, irrespective of their origin. On 24 July 2018, the Government published the National Security and Investment White Paper, which consulted on reforms to powers to scrutinise investment for the purposes of protecting national security. The Government are now considering carefully the response to that consultation and will respond in due course.
Baroness Anelay of St Johns (Con)
My Lords, while thanking my noble friend for his considered Answer, I point out that superfast 5G has great potential for our economy. It could be worth £200 billion over the next decade. The world leader in 5G is Huawei, but our closest security allies—Australia, New Zealand and the US—have already taken steps to restrict access to Huawei technology on the grounds of national security. Will we follow suit speedily? If not, why not?
Lord Young of Cookham
I am grateful to my noble friend, who has drawn attention to the need to get the balance right. America has banned Huawei from federal networks. We do not plan to go as far as that. I think America has a different approach from this country to international trade and inward investment, particularly under its “America first” policy. Of course, it has particular difficulties with China at the moment. We want to get the balance right and to have the best digital infrastructure we can, with up-to-date equipment to promote growth and inward investment, but we do not want to compromise national security. Huawei is precluded from taking part in certain sensitive parts of our infrastructure—lawful intercept, for example—and in other cases its equipment is interposed between equipment from other firms to mitigate risks. We keep the balance under review, but I think we have it about right.
Lord Cunningham of Felling (Lab)
My Lords, the Government have the laudable objective of procuring for the United Kingdom the latest 5G high-speed technology communications system. We should all support that. We should also all support the idea that we need adequate protection against some people’s technologies. Since, in this case, the most advanced optical fibre technology is from either Huawei or ZTE—both Chinese-owned and controlled—how will the Government achieve their objective if we are not to deal with them? There is no other way to do it at that level of technology. As I said some time ago in this House, if we are not willing to trust the Chinese with our communications system, is it not a bit perverse to suggest that we trust them with our civil nuclear power?
Lord Young of Cookham
In the case of Huawei, we have set up unparalleled arrangements in this country. As the noble Lord will know, we have set up at Banbury a centre to evaluate Huawei’s strategy and the equipment it is developing. That board is overseen by the chief executive of the National Cyber Security Centre, so we have a deep insight into what Huawei is up to and can take mitigating action in certain circumstances. As I have said, in certain circumstances we can ban it from taking part. But we want to make use of the latest technology and, as my noble friend said, Huawei is a world beater and it would not be in the national interest to ban it totally. We are looking at whether we have the legal structure right for the future in protecting national security, but I think we have the balance about right.
Lord Broers (CB)
My Lords, a word of caution on nuclear power—the noble Lord, Lord Cunningham, mentioned it. Does the Minister agree with me that we need to collaborate with the Chinese in building our nuclear plants? The Chinese are now world leaders. They have been the first to build an EPR, such as we are building at Hinkley Point, and they have also been the first to build the American AP1000. Specifically, collaboration with China General Nuclear, CGN, will be key to our success at Hinkley Point, Sizewell and Bradwell and in qualifying CGN’s own HPR1000, especially in the light of the withdrawal of the Japanese. I declare my interest as a member of the parliamentary group led by Ian Liddell-Grainger MP that visited the EPR reactor in Taishan in November. I would like to say—
Lord Broers
CGN has a remarkable safety record in nuclear power. We should run our plants ourselves but let it help us build them.
Lord Young of Cookham
My Lords, we welcome Chinese inward investment into the civil nuclear projects in the UK, as the noble Lord mentions, subject to our robust legal, regulatory and national security requirements. We have the most robust and stringent requirements. My advice is that the project at Hinkley so far meets all the necessary requirements that the noble Lord referred to.
Lord Wallace of Saltaire (LD)
My Lords, are we working on our own in responding to the Chinese threat, or are we working with others? Would it not be sensible not only to work with our other Five Eyes colleagues but also to work with our European partners? If we have to find and develop alternative technology for some of these critical projects, clearly it might be much more sensible to work closely with other friendly governments.
Lord Young of Cookham
Of course we should work closely with our allies, but it is just worth pointing out that some of our allies have a different legal framework. Australia, for example, has a law saying that telecom operators cannot procure equipment from a company that has extraterritorial jurisdiction. That rules out Chinese companies and many others. We do not have quite that same approach, but, of course, we learn from experience, from Australia, New Zealand, the United States and our other allies.
Lord Livingston of Parkhead (Con)
My Lords, does the Minister agree that the UK has had a much more sophisticated approach to Chinese companies for many years, both in setting up the cyber centre that looks at Huawei source code to understand it, and in recognising that in certain parts of UK networks, such as BT’s core network, it was not appropriate to put it in? It also recognises that much equipment from other countries actually has Chinese components in it, so the position is actually far more sophisticated and nuanced than perhaps were some of the headline statements made in many other countries.
Railways: Reliability
(5 years, 10 months ago)
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Lord Teverson
To ask Her Majesty’s Government what steps they are taking to improve rail service reliability in 2019.
The Parliamentary Under-Secretary of State, Department for Transport (Baroness Sugg) (Con)
My Lords, the Government will continue the current record level of funding in our railways, with around £48 billion to be spent on the network from now until 2024. This will support more maintenance and a huge uplift in renewals to increase reliability and punctuality for passengers. We are delivering the biggest rail modernisation programme for more than a century. The department, working alongside Network Rail and other industry partners, is committed to investing in the railways so that we can have a modern, reliable and punctual railway system, fit for the future.
Lord Teverson (LD)
Hmm. I accept absolutely that we have put billions into the rail network and rail services, and yet last year we had the worst service over the year for 13 years and the worst summer for 20 years. Will the Minister answer this very simple question: who is responsible for those improvements and who is in charge?
Baroness Sugg
My Lords, I certainly agree with the noble Lord that we had a difficult year in rail last year. Things are improving: punctuality has improved since this time last year; cancellations and significant lateness have improved as well. Previous investment focused on capacity improvements, which was much needed, given the doubling of the number of passengers. For the next control period, however, the main purpose of our investment is to improve reliability, and that involves repairing and replacing worn-out parts of the network to increase reliability. The Department for Transport is working very closely with Network Rail and train operating companies to deliver that.
Lord Cormack (Con)
My Lords, I thank my noble friend for all that she has done to try to ensure that we have the promised more reliable service between London and Lincoln. In particular, I thank her for attending the meeting with the chief executive of LNER and the Member of Parliament for Lincoln shortly before Christmas. Can she give the House any further comfort than she gave last week? LNER has said that it wishes to introduce this service in September, but I believe that we are now dependent on Network Rail. Can she put—I will not say a bomb—a boot behind Network Rail to ensure that it enables LNER to deliver on its promise?
Baroness Sugg
As my noble friend said, LNER is hoping to introduce new services to Lincoln from September. As he also said, this is dependent on Network Rail approving its timetable bid. The lesson we learned from the introduction of the May timetables last year, which caused such significant disruption, was that the industry needs to ensure that it is positively able to deliver the services to which it is committed. I know that Network Rail is working hard on that, and I thank my noble friend and the people of Lincoln for their patience in this matter.
Lord Clark of Windermere (Lab)
My Lords, what is the Government’s response to Network Rail’s proposal to close the trans-Pennine line from Manchester for 39 weeks each year for the next four years? How will that help reliability?
Baroness Sugg
My Lords, we are working on proposals for the upgrade to the trans-Pennine route. It is a significant project worth nearly £3 billion and it will bring alternative routes. We are working through that and will publish details shortly.
The Lord Bishop of Newcastle
My Lords, the latest quarterly statistics released from the Office of Rail and Road show that the London North Eastern Railway has suffered its worst punctuality levels in over a decade and came second—not an honour—on the list of the 10 worst train services for punctuality. As my noble friend Lord Cormack said, we had hopes for the new Azuma trains, but there is a lack of investment in infrastructure in the north—the signalling systems north of York are over 30 years old. Will the Minister tell us when the necessary infrastructure works will take place in order for these trains to run as they should to serve the people of the north-east and Scotland?
Baroness Sugg
My Lords, we hope that the introduction of the trains will happen soon. There remain challenges relating to electromagnetic compatibility, ORR approvals and train design. Obviously, the delay is disappointing for everybody involved, but we should not lose sight of the benefits of this £2.7 billion investment. Each train will have around 15% greater capacity and, once the full fleet is in service, the upgraded timetable will deliver a 28% increase in capacity, so we look forward to their introduction.
Lord Tunnicliffe (Lab)
My Lords, the Minister seemed to have some trouble with the question of whose responsibility this is. Can I help her on that matter? The railway is run by Network Rail and the train operating companies. The Secretary of State owns Network Rail—I know he probably does not want to but he does—and is personally responsible for its performance. The train operating companies work to a structure that is devised by the Government and supervised by the Government, and that does not work because the two halves have incompatible objectives. Does she agree that the sooner the train operating companies are brought into public ownership and a properly focused railway is created the better?
Baroness Sugg
It will not surprise the noble Lord to hear that I do not agree with him on that point, but I acknowledge that the rail system as it stands is not perfect. We have an ageing railway, which is at capacity. We need to look at how we run things and that is what we are doing through the rail review. It has been well over a decade since the last big change in the rail network. While we have seen record private investment and many more services, the system has of course had its challenges. We think that the time is right for a comprehensive review to ensure that our railways are run in the best way that they can be.
Baroness Randerson (LD)
My Lords, this is a specific example, but one of many that have been brought to my notice. In the three months leading up to Christmas, Southern Rail cancelled the Wallington to Victoria service 205 times and it was delayed 896 times. That is 1,101 times that passengers on that route faced disruption and misery. How can the Government justify a 3.2% fare hike on that route in the light of such appalling service—or are the Government not responsible for the fare hike either?
Baroness Sugg
My Lords, we have frozen fares in line with inflation, but I understand the frustration that people must feel when they have seen such significant disruption. We do of course have a compensation scheme that actually amounts to more than the rail fare freeze would be. On the particular line that the noble Baroness mentioned, London Victoria has 240,000 passengers a day. Over the Christmas and new year period, we did some work to improve reliability and make space for new services, and 99% of those engineering projects were completed on time. We installed new tracks, points, signalling and overhead structures to help improve the reliability of services at London Victoria.
Open Doors 2019 World Watch List
(5 years, 10 months ago)
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Lord Harries of Pentregarth
To ask Her Majesty’s Government what steps they are taking in response to Open Doors’ 2019 World Watch List of the 50 countries where Christians face the greatest persecution.
The Minister of State, Foreign and Commonwealth Office (Lord Ahmad of Wimbledon) (Con)
My Lords, the Government are deeply concerned about the severity of violations of the freedom of religion or belief in many parts of the world. We regularly raise our concerns at ministerial and senior levels. To ensure that the United Kingdom is supporting Christians in the best possible way, my right honourable friend the Foreign Secretary has commissioned an independent global review into additional practical steps the Government can take to support persecuted Christians. The aim is for this review to make an initial report by Easter.
Lord Harries of Pentregarth (CB)
I thank the Minister for his reply and I very much welcome what the Government are doing, particularly through the Foreign Secretary. The right of people to freedom of religion or belief is absolutely fundamental, whether they are Muslim, Hindu or atheist, but does the Minister not agree that there is a particular crisis affecting Christians at the moment, with the number of countries in which Christians are suffering persecution at a very high level, having doubled in the past year? Does he not agree that it is particularly dismaying that India should now appear at number 10 on this list, just below Iran and above Syria? India has a very good constitution and sound laws, but because of the rise of nationalism, these laws are simply not being enforced. Will he convey to the Indian Government our deep dismay that India should appear on this list at all, let alone at number 10?
Lord Ahmad of Wimbledon
My Lords, I agree with the noble and right reverend Lord on the issue of persecuted Christians. Around the world today 245 million Christians in 50 countries have been identified as suffering persecution of varying levels. As the noble and right reverend Lord said, that has doubled over the last four or five years. Clearly, action is needed. This does not preclude the fact that we will continue our efforts, and it is right that we stand up for all persecuted communities around the world, including those of no faith. He mentioned India specifically. India is the largest democracy and has an inherent, vibrant and strong rule of law. I assure noble Lords that we will continue to make representations to all countries, including India, to ensure that equality and justice for all citizens in India are upheld according to its own constitution.
Baroness Berridge (Con)
My Lords, I too welcome the inquiry and the acknowledgment of the scale of the persecution. One practical step that the Government took was to create the Syrian vulnerable persons resettlement scheme to enable people to come to this country. However, the recent figures released show that in the second quarter of last year, only 0.08% of the people who came to the UK from Syria were Christians, despite over 11% of that population pre-civil war being Christians and being targeted by IS. Will my noble friend the Minister please meet with his colleagues at the Home Office to investigate the reason for this apparent disparity in the figures? Will he then communicate the reason clearly to the UK Christian community, who are left with reports from NGOs and even the Times saying that the Government are operating a discriminatory policy against Christians?
Lord Ahmad of Wimbledon
First, I assure my noble friend that there is no discrimination against Christians or indeed anyone of any faith. However, she does bring to light an important issue about the situation in Syria. I am acutely aware of the challenges being faced by Christians in Syria and which continue to be faced in Iraq. We have seen appalling crimes committed against the Christian communities, as well as others. The major challenge that remains for Syrian Christians is the exodus of anyone from Syria who is of the Christian faith. My noble friend raises an important point about the Home Office scheme. I will certainly raise that with Home Office colleagues. But I assure my noble friend, and, indeed, all noble Lords, that we remain absolutely committed to ensuring that we stand up for the rights of people of all faiths and none, be it domestically or internationally.
Baroness Brinton (LD)
My Lords, in order to develop an appropriate policy to help persecuted Christians and other religious or belief groups, it is vital to have accurate data about them. Can the Minister say whether Her Majesty’s Government have made any progress in developing a database across government that tracks violations of freedom of religion and belief, and other important data about religion or belief minorities?
Lord Ahmad of Wimbledon
My Lords, the noble Baroness raises a very important point. It is certainly something that I have been looking at very closely since my appointment last summer as the Prime Minister’s Special Envoy on Freedom of Religion or Belief. There are many sources that we currently utilise to determine the level of persecution of different communities around the world. Equally, we have strong partnerships with representatives and leaders of different communities around the world. But her case for having a comprehensive database is a valid one, and certainly we will be looking to see how we can validate data that is provided by communities and organisations such as Open Doors, to ensure that it is verifiable and that we can share it with key partners to ensure that the issues of persecution can be addressed.
Baroness Nye (Lab)
The Minister will know that the Burmese army responsible for the Rohingya genocide is also targeting other ethnic communities, including the 1.6 million Christians in Kachin State, as outlined in the watch list. The International Development Select Committee report stated that,
“there may be a fundamental problem with the peace process that the UK is supporting”.
Will the Minister say how government support for UK-Burma trade takes into account these deeply held concerns about the Burmese military’s involvement in these human rights abuses, which surely amount to crimes against humanity?
Lord Ahmad of Wimbledon
My Lords, we are all acutely aware of the tragic plight of the Rohingya community, and the noble Baroness rightly points out other persecuted minorities in Burma. I assure her that not just bilaterally but with key partners and most clearly through international co-operation at the United Nations, we have raised this issue consistently. I believe we have seen progress, at least in the framework of MoUs which have now been signed between the Burmese Government, the Bangladeshi Government and organisations including the United Nations. On the specific actions that have been taken, the noble Baroness will be aware that the United Kingdom, working with European partners, has raised the issue of targeted sanctions against leaders of the military, and they have been extended to other members of the Burmese military. We continue to look at this. Ultimately, we hope for the safe, secure and voluntary return of the Rohingya community and other persecuted minorities, but we are a long way from that being a reality.
Hereditary Peers By-election
(5 years, 10 months ago)
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Lord Grocott
That was a necessarily and traditionally short report from the acting returning officer on the by-election. I would like to add a couple of details that might be helpful. There were indeed 16 candidates. It should be added that, as with previous hereditary Peer by-elections, this was a men-only shortlist. It was also, of course, the first by-election of 2019. As the House will know, 2019 is a particularly significant year because it marks the 20th anniversary of the by-election procedure, which was introduced in 1999 as a temporary, short-term measure. We do not rush things in the House of Lords. It is also the 36th by-election held under this procedure. The by-elections are coming along with increasing frequency—there is another one pending to look forward to—and inevitably it will be the case as Father Time takes his toll.
I have one final point, and I ask that we all listen to this carefully as the detail is not simple. This particular by-election, in which the whole House was the electorate, was one of 15 established under the 1999 Act to enable those hereditary Peers who were Deputy Speakers at the time to remain in the House. But after 20 years many of the original 15 are no longer Deputy Speakers, and the person who wins the by-election is not expected to become a Deputy Speaker. So, to summarise, in these Deputy Speaker by-elections the departing Member does not have to be a Deputy Speaker and the person replacing him does not have to be a Deputy Speaker either. You know it makes sense.
Baroness Smith of Basildon (Lab)
Notwithstanding my noble friend Lord Grocott’s comment, I welcome the new Member of the House of Lords, Lord Reay, and we look forward to him playing his full part in our affairs. As much as we welcome an individual Lord, the system has had its day, as my noble friend said. It is increasingly difficult to defend a temporary measure that has gone on beyond its time. While we do not criticise anyone who stands or any noble Lords who vote in such a by-election—or the result—we think a change in the system is long overdue. I know the government programme is very challenging at the moment but debating this tiny little Bill in government time to remove the hereditary Peer by-elections would be very welcome and have overwhelming support in your Lordships’ House.
Lord Taylor of Holbeach (Con)
My Lords, we have given a lot of time to this Bill. I have been in discussion with the noble Lord, Lord Grocott, for some time. He knows that, when appropriate, we will try to find time for his Bill to be debated on Report before it can leave this House. I will be in touch with him in due course.
Arrangement of Business
(5 years, 10 months ago)
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Lord Taylor of Holbeach (Con)
My Lords, noble Lords who have been assiduous in looking at the Forthcoming Business will see that there are some dates regarding the Easter Recess. In the first sitting week after Christmas, I gave an undertaking to come back to the House at the earliest opportunity to make an announcement about forthcoming recess dates.
Noble Lords will not need me to remind them that we continue to be in uncharted waters—a point made by the Leader of the Opposition. Therefore, what I say today is highly provisional. Nevertheless, I have been listening to those on all sides of the House who have made it clear that they would welcome some dates, if only on the basis of best intentions. I am happy to be open with the House about these intentions, but the usual caveat about dates being subject to the progress of business has never been so strong.
Eagle-eyed Lords will already have seen from this morning’s edition of the Forthcoming Business that it is my intention that the House should rise for the Easter Recess at the conclusion of business on Thursday 4 April and return on Tuesday 23 April. These dates match the provisional dates indicated for the House of Commons. If possible, I intend to provide for a long weekend in February. I have spoken of this several times, but I continue to anticipate that, next month, the House will need to sit on days when the Commons is not. I will let noble Lords have details of any long weekend very soon, but I hope it is helpful in the meantime to give such notice as I can for the Easter Recess.
Baroness Smith of Basildon (Lab)
My Lords, I am grateful to the noble Lord the Chief Whip. It is helpful for noble Lords who are trying to plan to ensure that they can play their full part in the work of your Lordships’ House—which we all want to do—to have the dates for the Easter Recess. Can I press him on the February long weekend? We understand that the Government have set themselves a rather challenging timetable, partly—I have to say—through their own incompetence in not bringing legislation forward sooner. If noble Lords wish to take part in the business of your Lordships’ House as much as they can, they need some certainty as to when they need to be here. I find it incredible that we are coming towards the end of January and we are not able to have dates for February. The noble Lord has said “in due course”. If he wishes noble Lords to play a full part in the work of this House, they need some greater certainty about what is happening in the next few weeks.
Lord Taylor of Holbeach
I appreciate that question. I understand why the noble Baroness has asked it, but I need to be certain of government business in the middle of February. If you read what I said, you will have a pretty good clue as to when I am telling you it might be. If you will allow me a week to see how business runs, I will come back to the House. The noble Lord, Lord Foulkes, is not here today. He is in Strasbourg. I have no doubt he would be very keen to make sure that we have some time in February for our families.
Central Courts IT System
(5 years, 10 months ago)
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The Advocate-General for Scotland (Lord Keen of Elie) (Con)
My Lords, with the leave of the House I shall repeat in the form of a Statement an Answer given in the other place by my honourable friend the Parliamentary Under-Secretary at the Ministry of Justice. The Statement is as follows:
“I am grateful for the opportunity to update the House on the IT issues facing the Ministry of Justice over recent days. I start by apologising to those who have been affected by the intermittent disruption, which was caused by an infrastructure failure in our supplier’s data centre. While services have continued to operate and court hearings have continued, we know how frustrating this is for everyone.
The issue has been that some of our staff in courts and tribunals, the Legal Aid Agency, probation and the Ministry of Justice headquarters have been unable to log on to their computers, but we have contingency plans in place to make sure that trials can go ahead as planned. The Prison Service has not been impacted and—to clarify incorrect reporting—criminals have not gone free as a result. We have been working very closely with our suppliers, Atos and Microsoft, to get all our systems working again, and yesterday had restored services to 180 court sites, including the largest sites.
Today, 90% of staff have working computer systems. Work continues to restore services, and we expect the remainder of court sites to be fully operational by the time that they open tomorrow morning. We are very disappointed that our suppliers have not yet been able to resolve the network problems in full. This afternoon the Permanent Secretary, Sir Richard Heaton, will meet the chief executive of Atos and write personally to all members of the judiciary.
I am very grateful to the staff who have been working tirelessly and around the clock, alongside our suppliers, to resolve these issues”.
Lord Beecham (Lab)
My Lords, last May the National Audit Office published a damning report on the Ministry of Justice’s four year-old £280 million IT programme. In the light of the latest fiascos affecting the probation service and the entire criminal justice email system, would the Minister rank the department’s performance in these areas as better or worse than that of Chris Grayling’s recent award of a ferry contract to a company with no ships, or the shameful record of the Home Office over the Windrush debacle?
Lord Keen of Elie
I rather fear that the noble Lord’s inquiry has taken sail. The position is that the issue that arose recently had nothing whatever to do with the development of the common platform system for the Ministry of Justice, which is still in its testing phase. It was entirely unaffected by the issue that arose, which was in fact attributable to the corruption of a routing server that has now been replaced.
Lord Marks of Henley-on-Thames (LD)
My Lords, the Answer repeated by the Minister is welcome, but expressions of frustration and an apology are, frankly, not enough. The reported consequences of this IT failure include: the adjournment and collapse of criminal trials; lawyers and litigants unable to access court documents; probation workers unable to provide courts with pre-sentence information; and even the farce of courts asking driving offenders to check their own DVLA records for past offences. The chair of the Criminal Bar Association, Chris Henley QC, describes the system as being “on its knees”.
We appreciate that the MoJ needs time to understand these failures, but they come at a time when the department is rightly further digitalising courts and tribunals to increase efficiency and save time and money. Will the Minister promise us an urgent, full and detailed inquiry to cover what has gone wrong, any failures of contract management within the MoJ, other weaknesses in the IT system, what updating and replacement is necessary and what it will all cost?
Lord Keen of Elie
My Lords, the reported effects narrated by the noble Lord are not accurate; let us be clear about that. There is no evidence of any cases being adjourned in either courts or tribunals with respect to this issue. In addition, it is not true that defendants have had to do their own DVLA checks. Furthermore, the probation service was affected by the outage but no offender appointments were missed, and the service reverted to paper processes where necessary. The IT systems are back up and working as of this morning with respect to the probation service. There was no impact on the Prison Service, which is in fact dependent on entirely separate computer system.
The cause of the outage was identified as a routing server that had become corrupted, and that has been replaced. It fell within one of our contractors’ systems and, as I indicated earlier, we are going to be speaking to our contractors with regard to that matter. At this stage we do not intend to institute the sort of inquiry that the noble Lord alluded to.
Lord Morris of Aberavon (Lab)
My Lords, is it correct that thousands of criminal cases in the courts have been disrupted? The National Audit Office criticised the delay in the IT system installation and said that the objectives would not be reached on time and on budget. Given this warning, are there any penalties in the contractual arrangements between the company and HMG?
Lord Keen of Elie
With respect to the noble and learned Lord, it is important to distinguish between two entirely separate systems: the existing system, which suffered the corruption of the routing server, and the proposed new common platform system which is in its testing phase. That is entirely unrelated to the existing system, but is of course connected to the modernisation of the courts system and the case management system, which has been allocated considerable funding at the present time.
With regard to the existing contracts, we are engaging with the provider over this issue. We regret the outage that occurred. Back-up systems did operate. Certainly, I am not aware of thousands of criminal cases being disrupted. I am advised that there is no evidence of cases being adjourned due to the IT issue.
Lord McNally (LD)
My Lords, it a fairly easy strike to suggest, as the Labour Front Bench did, that this was all the fault of Chris Grayling. I was also the Minister of State in the Ministry of Justice when we set out to reform court IT. Throughout my political life we have had, periodically, Ministers coming to explain some disaster in an IT system. What I wonder is: what happens next? As he rightly said, the comprehensive view of reform is not affected by this particular malfunction, but I do remember visiting courts and asking, “Have you got any problems with your IT system?” and they would say, “Well, our fax system doesn’t work”. This was long after the rest of the world had sent their fax systems to museums. The original idea is still valid: to invest in technology to make our court systems efficient. Where does the buck stop? I understood that the Cabinet Office also has responsibility for oversight of the efficiency of bringing in these new systems. Who is overseeing this? Who is keeping their eye on it? Or will we wait for another few years, and somebody coming along to explain why that system has not worked.
Lord Keen of Elie
I am obliged to the noble Lord for his observations, drawing upon his own experiences in the ministry when we began the introduction of the common platform system. Clearly, we want to move on to that platform fully and as soon as possible. We have already seen some success in the digital approach that has been taken to some forms of casework—such as debt actions and undefended divorce actions—and we want to roll that out further. With regard to the existing system: it is not perfect. If it was perfect, we would not be seeking to replace it. There are back-ups, but they are of limited operability because of the availability of wi-fi in courts in circumstances where it has not been possible for those working there to access their desktop computers. That has been the case in some courts recently, and in the ministry itself, because of this particular problem.
At the end of the day, the Ministry of Justice must consider the effectiveness and efficiency of the computer system that it relies upon, not only as a ministry but also for its attendant agencies and arm’s-length bodies. We accept that we have a responsibility in that matter.
Lord Judd (Lab)
My Lords, yesterday, in his evidence to the Justice Sub-Committee, the Home Secretary was emphatic that the registration of EU people living in Britain will be dependent entirely on IT and that there are no plans whatever to give people documentary evidence of what has been granted. With the vulnerability of IT again being illustrated today, I wonder whether we could have an undertaking that Ministers will look again at this approach.
Lord Keen of Elie
I thank the noble Lord for his question. I do not believe that it is for me to gainsay the Home Secretary’s evidence before the Justice Sub-Committee, so I am afraid I am not in a position to commit to any alternative approach on the matter at present.
Lord Pannick (CB)
My Lords, in preparing this Statement, have Ministers and their officials spoken to judges and lawyers, or only to IT consultants?
Lord Keen of Elie
My Lords, I was not involved directly in the preparation of this Statement. I was invited to repeat it in this House on the basis of information given to me. I cannot directly answer the question of who was consulted in the preparation of the Statement itself. If the noble Lord wishes I will write to him on the point—but if he has no desire for me to do so I will not.
Lord Scriven (LD)
My Lords, less than three years ago there was a whole-Whitehall review of the £500 million contracts given to Atos for government IT systems. This is another potential catastrophe with an IT system that Atos has implemented in government. In the light of that, what government-wide review will now be done of Atos’s ability to provide IT services for government on such a scale?
Lord Keen of Elie
My Lords, this issue arose in the context not of the implementation of an IT system but of an existing system, in particular the corruption of part of the hardware, namely a routing server, which has now been replaced. Given that that has been identified and rectified, we would not contemplate launching the form of inquiry indicated by the noble Lord.
Trade Bill
Wednesday 23rd January 2019
(5 years, 10 months ago)
Lords ChamberRead Full debate Trade Bill 2017-19 View all Trade Bill 2017-19 Debates Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: HL Bill 127-II(Rev)(a) Amendment for Committee, supplementary to the revised second marshalled list (PDF) - (23 Jan 2019)
“Regulations under section 2: state aid
(1) If regulations under section 2(1) make provision in relation to the issue of state aid for the purpose of implementing a free trade agreement, then a statutory instrument containing those regulations may not be made unless a draft of the instrument has been laid before, and approved by a resolution of, each House of Parliament.(2) The Secretary of State may not lay a draft of the instrument containing regulations under this section until—(a) he or she has consulted—(i) each devolved authority,(ii) public bodies, businesses, consumer groups, trade unions and non-governmental organisations which, in the opinion of the Secretary of State, have a relevant interest, and(iii) the public, and(b) he or she has laid a report of the consultation under paragraph (a) before both Houses of Parliament.”
Lord Stevenson of Balmacara (Lab)
My Lords, Amendment 16 in my name deals with state aid and whether it will continue under any new arrangements brought forward by the Government. It is essentially a probing amendment. I welcome the Minister to the Dispatch Box for his first response on the Bill. I look forward to working with him on this and related topics.
The reason for proposing the amendment is because we have very little information about what the Government’s intentions are on state aid, which is arguably a key component of all trading activity and can materially affect how and in what ways individual companies can operate and be successful within the home market and abroad. It has been operating since we joined the Common Market in 1972 and is a very strict and well-observed rule. It relates primarily to whether goods can circulate freely in the EU area, or the EEA, although there are some quite interesting exceptions, mainly on a cultural level, where changes are made relating to support for indigenous and widely spread cultures. Indeed, this country has benefited considerably from support for the arts, particularly film, theatre and television. State aid has also extended to fringe areas such as horseracing. For example, in France, it has been ruled that the support of a horserace betting levy system not unlike our own is a cultural exception to single market rules. That rule has been applied for the last couple of years, and is now being followed within the United Kingdom. It is an interesting area.
It appears that the Government have already decided that the existing rules will continue. Why was that decision made and on what statutory basis? Is there any opportunity for parliamentary procedure and process to be involved? It has also been announced that the Competition and Markets Authority will be responsible for ensuring trade rules within the state aid area. This was decided without any debate, discussion or consideration of alternative bodies. Again I ask: what was the statutory basis for that and is there an opportunity for parliamentary scrutiny, now or at some future stage?
Viscount Trenchard (Con)
My Lords, this amendment is rather strange in the context of this Bill. It seems intended to restrict the Government’s ability to make changes to the state aid rules unless they have consulted a long list of bodies—and even the public. But as the noble Lord, Lord Stevenson, said, the Government do not intend to use this Bill to provide themselves with a device for making such changes. One of the benefits of Brexit is that we will be able to apply our own state aid rules, either based on an equitable free trade area with the EU or consistent with WTO principles. The present EU rules need to be much improved and made proportionate; on occasion, they discriminate against British business and have a negative effect on the economy and jobs.
The UK is, quite properly, a very restrained user of state aid compared with our continental neighbours, spending approximately €90 per capita against a range of €170 to €240 per capita in Germany, France and Belgium. The point is that in cases such as that of Sheffield Forgemasters, the UK Government should be free, with the agreement of another place and your Lordships’ House, to grant state aid under what will rightly be very narrow criteria. Another case in point might be the Horizon Nuclear Power plant, which has been suspended by Hitachi because of a failure to agree the financing structure. Does the Minister agree that Her Majesty’s Government should look again at the extent to which they might commit public funds to ensure the successful completion of a hugely important contributor to our future energy mix—especially against a background where the only other major new nuclear power station, Hinkley Point, is to be financed by the French state and the Chinese state? Does the Minister agree also that this amendment is in any event completely unnecessary, because the Government have no need or intention to implement state aid commitments in rolling over existing free trade agreements?
Lord Fox (LD)
My Lords, had we debated this amendment during the last session, the night before last, we would not have had the benefit of yesterday’s report from the IPPR think tank on the subject of state aid. It reinforces the point made by the noble Viscount, Lord Trenchard, that the United Kingdom is a restrained user of state aid when compared to other countries in the European Union. That gives the lie to some of those who believed that the European Union was restricting the UK Government’s decision on the scale of state aid in this country—and that message might be conveyed to some members of other parties in the other place who are alleged to believe that the European Union would continue to restrict industrial support activities.
I was surprised to hear the huge shopping list that the noble Viscount, Lord Trenchard, presented for further state aid—his is not a voice that I had imagined would be making that point. That highlights the need for a state aid strategy. If we have an industrial strategy—which we do, whether some Members opposite like it or not—the purpose of state aid is to find strategic ways of delivering it in the best possible way for the best possible good of this country and its trading environment with the rest of the world.
Whether we trade as an EU nation, through FTAs or, as some people dream of, on WTO terms—which would be a nightmare for the rest of the world—there will still, sensibly, be restrictions and rules affecting what aid we can give and what restraints we have to apply. In spirit, therefore, I support the amendment, and I am interested to hear the Minister’s response.
I have a query that will probably reveal my ignorance of the process of legislation. Paragraph 4(1) of Schedule 2 contains a more general injunction around statutory instruments and consultation. I wonder whether that part of the Bill may pick up, to a large extent, what the noble Lord, Lord Stevenson, seeks to achieve. I would be happy to be wrong about that, but it would be helpful if the Minister, either now or later, would fill us in on that.
Lord Lansley (Con)
My Lords, I understand the point the noble Lord is making and exploring on this issue, and when we explore that point, it is worth saying that much depends on our future relationship with the European Union, and how we incorporate state aid into that. If we were in the European Economic Area, we would apply EU state aid rules; that is what EEA members now do. If we were in a free trade agreement with the European Union—as Canada and South Korea, for example, are—we would do something different. State aid provisions are built into those agreements, but they are based not on EU state aid rules but on the WTO Agreement on Subsidies and Countervailing Measures. That will all entirely depend on what the future relationship looks like.
The point has correctly been made that we use state aid proportionately less—about half as much, as a proportion of GDP, as the French do, and a quarter as much as the Germans. So state aid rules themselves have not necessarily restrained us from doing things. The noble Lord will be aware of the report on competition and state aids by the committee of which I have the privilege to be a member—the Internal Market Sub-Committee of the European Union Committee. The Government’s approach is, essentially, that we will replicate EU state aid rules in UK law, but we will, of course, be repatriating them so that they are exercised by our authorities rather than by the European Commission. In that context, it will be the Competition and Markets Authority, rather than any other body, which does that in this country—and it will do so independently.
If I remember rightly from the evidence that we received—I stand to be corrected if not—the Government’s intention is for this to be done by the CMA on a UK-wide basis, and not to be disaggregated to individual nations or regions. Clearly, the state aid rules themselves may have geographical parameters, as ERDF and other EU funding has done in the past, but that is a different matter. The rules on the application of state aid would be applied in this country. So we will have something considerably beyond the WTO requirements. For example—this is probably the best example and the most important for businesses—EU state aid rules would require us to have processes of notification and prior approval whereas, where WTO rules are concerned, if the Government engage in subsidy then they do so at the risk of post-hoc challenge and complaint. That is quite a different structure.
I say all that simply because, while this is an interesting issue, I am not sure whether the amendment does the job. However, I put it to the noble Lord that he might suggest that if future trade agreements of this kind, which are generally with third-party countries, were to apply state aid rules in a UK and third-party country agreement which differentiated from the WTO subsidies and countervailing measures provisions, that should be the subject of consultation and approval in this House. I cannot see why we would want to approve an arrangement for a WTO agreement on subsidies, which would simply be applied in the normal course of events. I hope that those few remarks are helpful.
Lord Lea of Crondall (Lab)
My Lords, a couple of the points made in the short debate on this amendment have been very wide and not actually to do with the amendment as such. Perhaps I may add a corrective: we discussed the mergers of railway companies, nuclear power companies and so on earlier today. The fact is that we look at one Chinese company against not one European company but sometimes more than one. Regarding the comment about the EEA, I am sure that the EEA will evolve while recognising that we often need one European company. It could be dressed up as something to do with either the nature of policy on mergers, competition and monopolies or with state aid policy. I put down that cautionary note because, when people say that this amendment does not do those jobs, it is clearly not intended to. However, many such wider commercial questions will have to be faced up to in the future.
Baroness McIntosh of Pickering (Con)
My Lords, following the comments of the noble Lord, Lord Stevenson, in moving this amendment, I would like to put a specific question to the Minister. In doing so, I declare that I am a member of the all-party parliamentary group on racing and have enjoyed the occasional day at the races as a result.
For 18 years, I represented a number of racehorse owners, trainers and stable lads and lasses in North Yorkshire, where racing is extremely important. My specific question relates not just to Amendment 16 but to Amendment 48, and looks ahead to the tripartite agreement on the movement of horses. I know that my noble friend the Minister is keen to talk in terms of continuity so, in those terms, what is the specific status of the tripartite agreement as of 30 March? Will it be rolled over automatically if there is no deal, or will it become part of a separate free trade agreement?
On the comments made by the noble Lord, Lord Stevenson, state aid was deemed to be almost a barrier to the form of instrument used in replacing the racehorse levy which, as your Lordships will know, is the means by which most of racing is financed. The levy puts it on a sound financial footing, but it was prayed in aid that it would be deemed state aid. However, as the noble Lord said, that was specifically excluded for a similar levy that has been allowed in France, which is pertinent to the debate on this amendment. What is good for the goose has to be good for the gander, so if the French racing industry was allowed to be supported then we should be allowed to continue to support the British racing industry. This goes to the heart of the tripartite agreement, so what is the status of state aid, as raised by the noble Lord, Lord Stevenson? What is the position of the tripartite agreement going forward from 29 March this year?
Baroness Jones of Moulsecoomb (GP)
My Lords, I support Amendment 16, which is a crucial amendment to debate within the Trade Bill. The general principle of state aid rules, which is that the Government do not go around doling out money to big business in ways that are unfair or anti-competitive, is a good one. At the same time, there are concerns about state aid rules being used as a vehicle for predatory capitalism to dismantle the state and override democratic control of quite important parts of our economy. This is particularly important for Greens, because Greens are not as concerned with the electoral cycle as with the future of humanity and this planet. If we are going to listen to the IPCC report, which says we have 12 years before we have to face dramatic climate emergencies, then we need to transform our economy and make it fit for the future.
And that is the role of this House. The other place deals very much with the day-to-day—what happens on Monday or Thursday mornings. We here have a responsibility to the future. A green new deal is one of the answers. It would create 1 million well-paying climate jobs and set us on a sustainable footing for future generations. It would require active fiscal and monetary measures that would favour more sustainable production and consumption over more ecologically destructive options. Sometimes the state would have to pick winners and losers—that would be part of it—particularly in relation to natural monopolies such as railways and the energy system. Even the Government are recognising that the market is failing on some of these important issues, and that state intervention is required. Much of this could be called state aid, depending on what definition is used.
For these reasons, it is absolutely essential that our hands are not tied in any way which might interfere with our ability to tackle the climate emergency that we are facing, as well as all the other big issues facing our economy.
Lord Purvis of Tweed (LD)
My Lords, I seek some clarifications when the Minister responds, broadly in response to the constructive contribution from the noble Lord, Lord Lansley. With the withdrawal Bill, there was much debate in Committee and this House regarding how existing EU law will be migrated into UK law. There were 12 competences the UK Government believed were reserved and would therefore be fully within the competence of the UK Government, but that the devolved Administrations believed were either devolved or had a direct impact on devolved powers.
State aid was one of those areas where there was no agreement. That means that if there continues to be no agreement, then the amendment in the name of the noble Lord, Lord Stevenson, is absolutely critical. It means that for regulations brought for the continuity agreements, there needs to be far more enhanced consultation with Administrations that believe this is touching on their direct competences. If there has been agreement, then perhaps the amendment is less necessary for the continuity agreements; but as we come to further amendments, this sets the tone for what will be necessary for future agreements. When the Minister responds to this group, I hope he will be able to provide clarification on where the discussions are, regarding whether there is agreement on where state aid lies within this area of competences.
The Minister of State, Department for International Development (Lord Bates) (Con)
My Lords, I join others in thanking the noble Lord, Lord Stevenson, for moving this amendment. In response to my noble friends Lord Trenchard and Lord Lansley, I think that the noble Lord intended this as a probing amendment, as he said, to give the Government the opportunity to put some issues on the record. It has been very timely, not least because under the EU withdrawal Act, mentioned by the noble Lord, Lord Purvis, on Monday we laid the regulations on state aid before the House. That 77-page document will now make its way through the rigorous scrutiny of the Joint Committee on Statutory Instruments and then the Secondary Legislation Scrutiny Committee. Then, of course, it will be subject—because it is by the affirmative procedure—to scrutiny later in this House. For that reason some of the specific issues referred to by my noble friend Lord Lansley and the noble Lords, Lord Purvis and Lord Lea, might be usefully dealt with in that area.
Clause 2 is not about making changes to existing agreements, and the regulations cannot be used for future free trade agreements, as my noble friend Lord Lansley rightly identified. In answer to the noble Lord, Lord Stevenson, we also need to recall that the Competition and Markets Authority has been given this responsibility domestically, across the UK jurisdiction. When it comes to free trade agreements and the EU, the Trade Remedies Authority would undertake that responsibility.
To provide further reassurance that we do not expect to need to use these powers to set up a domestic state aid regime, I can inform the Committee that we have laid the instrument I referred to. This instrument, the State Aid (EU Exit) Regulations 2019, will be made under the European Union (Withdrawal) Act 2018 and establish a domestic state aid regime that will work for the whole of the UK at the point that this is required. No doubt Noble Lords will be offered an opportunity to scrutinise this in detail.
Subsection (2) of the proposed new clause requires the Government to consult relevant stakeholders prior to laying implementing regulations under Clause 2 which make provision on state aid. We have been clear that proportional consultation is of the utmost importance to us. We have engaged with a large number of stakeholders through our programme of trade continuity. The Government will always consult stakeholders as appropriate, so to set out specific provisions concerning consultation on state aid is not needed at this stage. The Bill already requires the Government to lay reports before Parliament in which we will provide detail of any real-world changes to free trade agreements. These will be laid before the agreement is ratified or regulations are laid under the Clause 2 power in relation to that agreement, whichever comes first.
Any significant differences in agreements that are relevant to state aid would be identified in these reports and Parliament would then be in a position to take an informed decision in relation to the making of the regulations or the conduct of the ratification process. I say again that we do not expect to need to make regulations under this power in order to implement state aid commitments in existing free trade agreements.
I turn to some of the specific points that were raised. My noble friend Lady McIntosh raised the horserace betting levy and the tripartite agreement. This is something we will come to in Amendment 48 in a later group, so perhaps I can leave it to the lead Minister, my noble friend Lady Fairhead, to respond, but the relevant provisions of the horserace betting levy were notified to the Commission and approved by the Commission under state aid rules. I confirm that the TRA—the Trade Remedies Authority—will not be responsible for state aid prioritisations in FTAs. It will be a matter for individual free trade agreements to establish a dispute mechanism.
Lord Stevenson of Balmacara
I was going to ask the Minister about the TRA—I am glad that he tried to clarify what he had said, because he did raise a doubt about what was arranged. Have I got it right? I would be grateful if he could confirm that we are proceeding on a continuity basis and using the withdrawal Act to ensure that, under the statutory instrument he mentioned, the existing set of rules that currently apply, because of EU directives and regulation, will be applied under UK law after exit day. Therefore, that process does not require any further discussion or debate, because of the reasons he has given, and he is not saying that in future trade agreements there will be a specific role for state aid rulings by the TRA—that will remain with the CMA—but there will be an opportunity to discuss that broadly when we get to the point at which we are, post continuity, talking about the real world and what is actually going to happen in trade. Is that right?
Lord Bates
That is correct. I am grateful to the noble Lord for setting that out. My noble friend Lord Trenchard mentioned the Government’s commitment to the state aid system. That point is contained in Command Paper 9593, The Future Relationship between the United Kingdom and the European Union, which says in section 1.6.1:
“The UK has long been a proponent of a rigorous state aid system—this is good for taxpayers and consumers, and ensures an efficient allocation of resources”.
Moreover, the political declaration which accompanies the withdrawal agreement points out in section XIV, paragraph 79:
“The future relationship must ensure open and fair competition. Provisions to ensure this should cover state aid, competition, social and employment standards”.
That will all be fleshed out as the future economic agreement is worked on. Again, I thank the noble Lord for the opportunity to clarify some points on the record.
Lord Purvis of Tweed
Will the Minister clarify that since the Sewel convention continues to apply, the UK would not legislate ordinarily on devolved matters if the Government have brought forward this regulation? Last year, during the withdrawal Bill process, the devolved Administrations believed that this touched on their competences with state aid. Has there been agreement with the devolved Administrations that this is a fully reserved issue?
Lord Bates
Perhaps I could write to the noble Lord on that to make sure that I get that absolutely correct. I will write to him. Does the noble Lord want to come back on that?
Lord Purvis of Tweed
I wonder if the Minister is able to write before we get to the next grouping because this is going to be relevant. Whenever the Minister can provide clarification, it will be welcome to the Committee.
Lord Bates
I have a sneaking feeling that some clarification may be coming via my noble friend Lord Younger by the time we reach the next grouping. I am sure the noble Lord will have an opportunity to respond to that. Failing that, I will be very happy to write before Report. I thank the noble Lord and ask him to consider withdrawing his amendment at this stage.
Lord Stevenson of Balmacara
I am grateful to all those who have contributed to this debate. It was indeed a probing amendment and an attempt to elicit a series of responses from the Minister. We have those on record and I am grateful to him. Having said that, we have raised one or two issues that need consideration in the non-continuity mode, if we ever get to that point, about exactly why we are doing what we are doing, how it might be modified in future, and what the appropriate regulation would be. The point made by the noble Lord, Lord Purvis, is absolutely right. We have to avoid getting ourselves into the wrong side of the argument that relates to engaging those who have trade responsibilities. There will be significant and important trade responsibilities when they eventually end up with Scotland, Wales and Northern Ireland, and they should not be excluded from proper consideration and debate. With that, I beg leave to withdraw the amendment.
“Regulations under section 2: Joint Ministerial Committee
(1) In making regulations under section 2, the appropriate authority must have regard to, and take into account, the views expressed by a Joint Ministerial Committee appointed by the Prime Minister.(2) The Prime Minister may, for the purposes of this Act, determine that the Joint Ministerial Committee shall consist of representatives of the governing authorities of the United Kingdom, Scotland, Wales and Northern Ireland.”
Lord Stevenson of Balmacara
My Lords, we are moving to a point that has already been raised and given a small trailer by the noble Lord, Lord Purvis. We need a system in place, although I am sure that the response from the Government at this stage will be that this is not necessary for continuity issues. However, we have already seen that there will be issues around trade and related matters for which we need to be sure that structures are in place that will allow for those resolutions.
Amendment 17 seeks to place a duty on the Government to consider a formal structure under the joint ministerial committee system that would allow debates on trade—particularly future trade arrangements, but I think other issues as well—to be dealt with in a systematic, transparent and trustworthy way. In that sense, I do not think that we differ from where the Government would like to be. What we lack is any understanding of where the Government are on this matter and what negotiations are coming forward. This is a probing amendment to try to make sure that we have some sense of that as we go forward.
In an attempt to help the Government, the noble Lord, Lord Purvis, and I have also put down Amendment 76 as a way of expressing in the Bill what the different agencies involved in this can and cannot do. Currently this is dealt with by a convention known commonly as the Sewel convention, although it has been overtaken by other legislative approaches. It attempts to set out, in this Bill at least—although it may apply to other areas—a set of rules allowing certainty on under what conditions and with what powers the UK, in operating its reserve powers, may or may not legislate on devolved matters where it is agreed that responsibility lies with the devolved areas.
I understand fully that the Minister will feel that many of these issues are subject to discussions elsewhere that are probably way above his pay grade. I do not seek to diminish him in any respect with that, but we want to flag up the importance of this matter to our trading relationships, not just because trade is important but because we are moving into an era where, irrespective of how and under what conditions we move from our current position with the EU, trading responsibilities will be applied in Scotland, Wales and Northern Ireland in a manner that has not been seen before. Issues that are specific and germane to those countries will be raised. We do not have a robust structure under which this can be resolved, and it is time for us to move forward on that. I beg to move.
Lord Purvis of Tweed
My Lords, I am grateful to the noble Lord, Lord Stevenson, for outlining the amendments so clearly. I want to add something in only a couple of areas. In doing so, I welcome the fact that the noble and learned Lord, Lord Mackay of Clashfern, is in his place. He and other colleagues will recall discussing—in debates on the withdrawal Bill—translating EU retained law into domestic law in a number of areas that either impinge on or link directly to what are currently devolved competences. At that stage, the Government made a number of concessions and changed their position so that the presumption was to devolve powers—and that was welcome.
Therefore, the sticking points, to some extent, were issues in what the Government termed the “framework agreements” with the devolved Administrations, where there had been no agreement with the devolved Administrations on what was in the reserved or devolved competences basket. In the previous group, state aid was one such major issue. Of the 157 areas, there was no issue with 49 of them; in 82 of them, the Government and the devolved Administrations agreed that the common framework would be needed; 24 areas required further discussion; and in 12 areas, the UK Government believed that the competences were reserved but the devolved Administrations believed them to be devolved. That is relevant to discussions about how the regulations for the continuity agreements will take place and will give an indicator for the future, as the noble Lord, Lord Stevenson, said. I seek further clarification on the other areas.
These issues are not esoteric. The 12 areas are: equal design and energy labelling, which is an important part of trade agreements now, as we discussed in Committee on Monday; product safety and standards relating to explosive atmospheres; elements of the network and information security directive; environmental quality in the timber trade, which is of considerable significance to the Scottish economy; data sharing; food geographical indications and protected food names, which are core parts of trading relationships; medical devices; migrant access to benefits; data protection; radioactive source notifications; state aid, as mentioned; and vehicle standards, including the various types of approvals and directives for roads.
Those 12 areas are part of existing trade agreements and will be key elements of future trade agreements, but in 2018 no agreement was reached with the devolved Administrations on them. It would be helpful if the Minister could update us on whether agreement has been reached on them, so that our concerns can be allayed, or whether discussions are continuing on them. This is important for both continuity and the future, because—as the International Trade Committee in the Commons has discussed and as the Scottish and Welsh Governments have published—there are proposals for how future trading arrangements would need to be put in place.
One of the options—as the Scottish Government have called for and as the UK Trade Policy Transparency and Scrutiny report called for—was a joint ministerial committee or intergovernmental trade committee to complement the advisory committee that the Government have established. The Commons committee made a very constructive set of proposals that it would be a mechanism through the devolved Administrations as part of the consultation process. There would be a formal advisory role through the mandate process and another formal advisory role throughout negotiations. No doubt there will be further discussions about any dispute resolution mechanisms and whether such measures have to be approved by the devolved legislatures in addition to consultation with the Administrations.
The noble and learned Lord, Lord Mackay, put forward very constructive suggestions about how intergovernmental relations could operate. These are both necessary for the continuity agreements and vital for any future agreements. I am grateful that the noble Lord, Lord Stevenson, highlighted this area, and I hope that the Government will be able to give clarification on where we are with the understanding of where these competences lie and the role of the necessary consultation.
Lord Hain (Lab)
My Lords, in speaking in support of both these amendments, in a way I am dealing with the points I raised with the noble Baroness, Lady Fairhead, which she did not respond to—inadvertently, I am sure. Maybe both she and the noble Viscount, Lord Younger, could consider writing to me about this. As I described at the last sitting, it gives rise to concern that we will see an action replay of the power grab that Whitehall tried to pull on the devolved Administrations in the course of the withdrawal process. There was an attempt by Whitehall to repatriate to London those policy areas—for example, the environment and many others—that were devolved but held at a European level because of our membership of the European Union. That caused great aggravation with the devolved authorities, particularly—in the absence of Northern Ireland’s Government—with Wales and Scotland, which in the case of Scotland is festering on. An agreement was belatedly reached with Wales.
In this process, particularly when making regulations, we will potentially see these same issues arising. There is therefore a strong argument for the proposal put forward by my noble friend Lord Stevenson in Amendment 17 for the joint ministerial committee or some equivalent body to be given the overall supervising authority here. Having been a member of the JMC at various times in government, I was never very impressed with it. It was a bit of a talking shop. Since 2010, under the coalition Government and now, I hear from successive First Ministers of Wales and individual Ministers for Wales, with whom I am in direct and regular contact, that nothing has changed.
Yet the issues over Brexit are even more serious and of even more constitutional and policy importance than prior to this whole sorry horror show unfolding. The Government need to consider putting in place, preferably in this Bill and in the form specified by these amendments or some equivalent form, procedures that are recognised and have to be abided by, before we run into the same kind of problems that arose earlier in this whole Brexit saga.
Viscount Trenchard
My Lords, surely it is not necessary to set up a joint ministerial committee for this purpose. Insofar as the novation of FTAs affects devolved powers, the Government will in any event be bound to consult. Surely a joint ministerial committee, such as the amendment proposes, would make the process of rolling over the EU’s FTAs much more cumbersome and time-consuming, especially if the EU persists in refusing to enter into a reasonable, equitable agreement without a backstop.
On Monday, in the debate on the GPA, the noble Lord, Lord Hain, referred to this matter, and has just spoken again in similar vein. He referred to a power grab by Westminster but actually, if the powers being returned to the UK from the EU relating to devolved matters were all to go immediately to the devolved Administrations, that would represent a power grab by the devolved Administrations. Surely the powers that were devolved relating to matters that are partly or wholly EU competencies preserve the need in many areas to maintain a UK-wide market; while we have been in the EU that has meant an EU-wide market. We are shortly to recover our sovereignty over our own UK market, I trust, but that in no way obviates the need to maintain the UK-wide market in many sectors. Furthermore, as the noble Lord, Lord Hain, also pointed out, the amendment requires membership of the joint ministerial committee by a representative of the Northern Ireland Executive, which suggests that they might not be operational for some time.
Lord Hain
May I clarify a number of points? First, the original Bill, over which there was the power-grab tussle, was actually amended by the Government in response to the Welsh and Scottish Governments’ complaints. They recognised that the original procedure, which the noble Viscount seems to want to wave through again, was the wrong procedure and that it was not right to set out on the course on which they originally set out. I hope that he will accept that point, because I was rather worried about the tone and the content of what he said.
Secondly, since the joint ministerial committee exists already, and its machinery is in place and operates already, the amendment is saying that these regulations under the umbrella of the Trade Bill would formally have to go through the JMC. It need not be a complete convening of a meeting which, I accept, is time-consuming and resource-consuming, but I recall well from my days in government that cabinet committees sometimes operated by a process of written consent and amendment between the different Whitehall departments. I am sure that the noble Lord, Lord Kerr, and many others will remember that operating in that way. It could operate in that way for the purposes of these regulations, but there would be a statutory obligation to process these regulations in that fashion. As I understand it, that is the point that my noble friend Lord Stevenson is seeking to get cemented in.
Viscount Trenchard
I thank the noble Lord for correcting my ignorance about the joint ministerial committee already being in existence, although there is obviously no Northern Irish representative on it at present. On the other matter, I still do not understand why it can be sensible in the case of powers that are EU competencies today but which are also devolved. If those powers are repatriated to the UK, it is still necessary to maintain a UK-wide market because, by virtue of being members of the EU market, we have had a UK-wide market within the EU. Therefore, if the entire powers are delegated to the devolved Administrations, we effectively break up our single UK market.
Lord Mackay of Clashfern (Con)
My Lords, this is redolent of what we discussed much earlier. The powers that the EU has in the United Kingdom are of different types. Where they go when they are brought back to the UK, as we hope will come to pass—on my present appreciation of what is going on, that is rather a hope—does not just depend on the subject matter. It does not just depend on whether it is agriculture or whatever; it depends on the nature of the power that is devolved. A power that operates only in Scotland would be devolved to Scotland because in the constitutional arrangements there are two restrictions. The reserved powers are one type of restriction, but the other is the geographical restriction. You cannot make laws in Scotland for the rest of the UK. Therefore, if common market policy for the whole of the UK is in question, and that is the power in question, it has to stay with the Parliament in Westminster. But if it is a power related to agriculture, which is restricted only to Scotland, or Northern Ireland or Wales, it is remitted to the legislatures operating there—if a legislator is operating there.
Lord Hain
I apologise for prolonging this discussion. I urge the Government to reflect on this: given the trouble that we have already run into in this process with the devolved Administrations, if there were a process where these regulations automatically had to come under the umbrella—as the noble and learned Lord, Lord Mackay of Clashfern, implies and which I agree with—that would impose a discipline on all the parties concerned to use that process to resolve any common issues that are outstanding. It is an established process, but it has not really been used. In the post-Brexit situation, which I think will be a nightmare, these procedures will be needed even more to ensure the constitutional stability, success and indeed viability, given what is going on in Scotland and Northern Ireland over Brexit, of the whole of the union.
Viscount Younger of Leckie (Con)
My Lords, the Committee will notice that we have another change of driver—or perhaps a navigator having temporary control of the wheel. If I read the noble Lords, Lord Stevenson and Lord Purvis, correctly, the intention behind the amendments is to ensure that the voices of the devolved Governments are heard in relation to trade agreements. That is something that the UK Government entirely support. Indeed, the Department for International Trade is in discussion with the devolved Administrations on their role in future trade agreements.
To give a little more information to the noble Lord, Lord Purvis, the UK Government are committed to working closely with the devolved Administrations to deliver a future trade policy that works for the whole of the UK. But it is important that we do this within the context of the current constitutional make-up of the UK, while acknowledging that international trade policy is a reserved matter. To go further, we are currently having detailed discussions with the devolved Administrations at official level on their role in future trade arrangements, with the aim of agreeing new working arrangements before EU exit. In fact, we are continuing this engagement later this week.
I am happy to provide assurance to the House that our clear intention is that there will be a formal and regular intergovernmental ministerial forum to consider future trade agreements. The devolved Administrations already participate in other ministerial forums, such as those for EU negotiations. Frequency and any terms of reference are subject to further discussions and agreement with the devolved Administrations. However, we expect the forum to include our Minister for Trade Policy and his or her counterparts in the devolved Administrations.
The noble Lord, Lord Purvis, asked some questions on this point. The UK Government view securing an agreement with all the devolved Administrations as the best possible scenario, and it is the one that we will continue to work towards. We are committed to securing LCMs for the Trade Bill and have worked closely with the devolved Administrations to understand and respond to their concerns. As a result, we have made amendments to the Bill that answer many of those concerns.
The requirement for Ministers of devolved Administrations to seek the consent of the UK Government when making regulations that come into effect before exit day, or that relate to quota arrangements, has changed to a requirement to consult, of which I suspect the noble Lord will be aware. We will continue to respect the devolution settlements as they relate to trade agreement continuity and future FTAs. We will not normally legislate in areas of devolved competence without the consent of the devolved Administrations, and certainly not without first consulting them.
The amendment, however, would apply to existing trade agreements only and is, in this context, not proportionate. Clause 2 will be used only to ensure the continuity of existing trade agreements that are already in force. It will not be used for future trade agreements. Therefore, Amendment 17 would add risk to the swift and timely rollover of existing trade agreements. Given that these agreements are or will be already in force and that the purpose is to ensure continuity, the amendment is, at best, disproportionate and could mean that we were unable to deliver crucial continuity for businesses and consumers throughout the United Kingdom. For that reason, the Government cannot support Amendment 17. I hope that I have provided sufficient assurances on our intentions for engagement with the devolved Administrations in trade agreements.
Lord Purvis of Tweed
On the first point, it is very helpful to hear about discussions taking place through ministerial forums. This would be, I think, outwith the memorandum of understanding process in the joint ministerial committees, which have now been well established for 20 years as the intergovernmental framework between the devolved Administrations and the UK Government. I am sure the Minister is always very careful and specific with his language: I heard him say “forum” but I did not hear him say “joint ministerial committee” or “intergovernmental committee”. A little more information about that would be helpful.
Viscount Younger of Leckie
I can help the noble Lord. I was very careful to use the word “forum”—but perhaps I should have used “fora”, which of course is the plural. The reason for that is that the process is designed to mirror what has worked with the EU up to now. We want to replicate the terms that are used for EU negotiations by not calling it a joint ministerial committee. But I understand the intention behind the noble Lord, Lord Stevenson, using that term.
Lord Stevenson of Balmacara
I am on the same page as the noble Lord, Lord Purvis. Why is it so complicated? The joint ministerial committee system has, as he said, worked well for more than 20 years. It provides an opportunity for those who are required to be present around the table to sit down, discuss and arrive at conclusions. In a debate on an earlier Bill, the noble and learned Lord, Lord Mackay of Clashfern, suggested a way of developing that into a formal structure within which there would be appointed chairs or elected chairs and rotating responsibilities. We seemed to be heading down that route, but now we are talking about this rather curious IGMF, which I had not heard of before. It is nice to know that it does indeed exist and may be working on EU matters. But I have always understood the relationship around EU matters as being—as the noble and learned Lord, Lord Mackay, picked up rather cleverly—around a settled set of responsibilities, where there is not the problem of geography meeting functionalism. That is the problem here, because as soon as we have a situation where the responsibility is devolved because it is not reserved, and there is a need to arbitrate and barter out the various competing interests across the nations of the United Kingdom, there has to be some formal structure. I do not think a forum provides that.
Viscount Younger of Leckie
We may be dealing with semantics here, but I will certainly write to the noble Lord, Lord Stevenson, and the noble Lord, Lord Purvis. My understanding is that there is a reason, but it is not a particularly big reason, which is that the difference between a joint ministerial committee—the expression that the noble Lord, Lord Stevenson, has just used—and a forum is that for a forum the devolved Administrations are seeking and are getting more regular and frequent conversations with us in the UK Government. I think a letter should clarify that.
Lord Purvis of Tweed
I am grateful that the Minister will be providing a letter. As the Commons committee and others have said, such a forum, which will include other groups, including representatives from the Administrations, should not be seen as an alternative to the mechanism of joint ministerial intergovernmental committees, which, as the noble Lord, Lord Stevenson, said, are more about the discussions that take place about legislative competences. As the noble and learned Lord, Lord Mackay of Clashfern, indicated, this is important now. The Minister said it is important that the continuity agreements are done swiftly. These continuity agreements may be in place for three years at the least, but they can be extended time and again. The agreements currently in place with the EU are permanent agreements, therefore we would be bringing into UK legislation what could well become permanent agreements. It is therefore important that if there are outstanding issues about where those competences lie, they are cleared through some form of intergovernmental process. If those points could be addressed in the Minister’s letter, I would be most grateful.
Viscount Younger of Leckie
I will certainly address the extra points that the noble Lord has made. The point I want to emphasise to the Committee today is that this forum is being regarded as particularly serious in the times that we are in. I have mentioned some names to be included as part of that forum, but this is work in progress.
On Amendment 76, the UK Government recognise the important role each devolved Administration will play in the implementation of the Trade Bill. The Government are also committed to ensuring that withdrawal from the EU is a successful and smooth process for the whole of the UK. The use of concurrent powers is in keeping with existing devolution arrangements. It allows for regulations to be made once for the whole of the UK where it makes practical sense to do so. The intention behind this is legislative efficiency.
The noble Lord, Lord Purvis of Tweed, asked about the implications for the Trade Bill of the freezing power in the EU withdrawal Act. We have been clear that the regulations to freeze competence to preserve our existing frameworks are not a mechanism for avoiding seeking legislative consent when creating our future frameworks. Without wishing to labour the point, I reiterate my earlier commitment that the UK Government will not normally use these powers to amend legislation in devolved areas without the consent of the relevant devolved Administrations and certainly not without first consulting them.
I acknowledge the mini-debate started by the noble Lord, Lord Hain. In essence, he asked whether the concurrent powers amount to a power grab—I think that is the expression he used. Under the Trade Bill, every decision that the devolved Administrations can make before exit they will be able to make after exit. The augmentation powers in the Trade Bill will be held by both the UK Government and the devolved Administrations. This approach will provide greater flexibility in how transition agreements are implemented, manage legal risks where competence boundaries are unclear, and allow for a reduced volume of legislation. The noble Lord invited me to write, and if he is not satisfied with that answer, I will certainly follow up with a letter should he wish.
Lord Stevenson of Balmacara
I am grateful to the Minister for that full reply. I am looking forward to the letters, which I will read very carefully.
It is sufficient to leave the position on Amendment 17 as it is at the moment. It is more complicated than can be dealt with within the confines of the Trade Bill. It needs a much wider conspectus of views and to be informed by other debates elsewhere. The principles that we have been articulating are important. I hope the Minister recognises how valuable they will be within what appears to be the Government’s view that rolling forward existing trade arrangements on the continuity model will be uncomplicated and not difficult. I have my doubts—“I hae ma doots”, as I would normally say. Hansard will not necessarily pick this up.
The key is: how does it work in practice? It is really important to use our words carefully, as the Minister has done, to assure ourselves that we are not getting into exactly the same position as we did on the withdrawal Bill. In effect, he said that the Government will not normally legislate in areas that are devolved. Of course, the key is: what does “normally”’ mean? How exceptional does it have to be before we see an extraordinarily difficult situation leading to contests between the two agencies? He went on to say that they would not do so without the consent of the devolved Administrations. Consent is a crucial word. The noble Viscount, Lord Trenchard, used the word “consult” as if that took both meanings, but it does not. Consult is one thing; consent is so different. We have to be sure exactly where we are. The discussion and debate around this would then result in an agreed position between both Parliaments as to how it would operate in practice. That is the Sewel convention.
If we accept everything that has been said in this debate—and we will get contributions on other Bills and issues of policy as they come forward—why do the Government not look very carefully at the wording of Amendment 76? It was provided to us by the Welsh Government as a proposal for reaching a point of unanimity on this issue. Why is it not appropriate to put it in this Bill, or, if not, in some future Bill very closely aligned to this? I think it will be required. My guess is that we will need it quite soon. It is not legally unenforceable. It is what we do. So let us get it right. I beg leave to withdraw the amendment.
Lord Purvis of Tweed
“Status of the United Kingdom
Before exit day, a Minister of the Crown must lay before Parliament a report specifying which countries and organisations must amend their own domestic legislation in order to ensure that the United Kingdom is treated by that country or organisation as if it were a member of the European Union for the purpose of free trade agreements or other international trade agreements during the period between 30 March 2019 and 31 December 2020.”
Lord Purvis of Tweed
My Lords, I will also speak to Amendment 19 in this group. At Second Reading of this Bill, the Minister, the noble Baroness, Lady Fairhead, said that this process was about transparency. Amendment 18, which is a probing amendment, and Amendment 19 seek some transparency in a rather opaque set of situations—I listened to the Secretary of State for International Trade this morning from Davos adding even more confusion to the current position on the continuity agreement discussions.
On Monday, I referenced the fact that, through our membership of the EU, the UK has a trading relationship in place with 35 countries; 47 are partly in place, and there are 22 pending country agreements. These represent 66% of UK trade. Some are extremely complex. Some have been split into trading arrangements and investor dispute mechanisms, and some are of critical importance to certain sectors of the British economy. It is incredibly important that, between now and 29 March, we have a much greater understanding not only about what they are and how they will be translated into British law but also about the relationships that we have with other countries.
One of the reasons that Dr Fox has given for why we have not been presented with the trade agreements to roll over into our legislation is the reluctance of other countries. He has given a number of reasons why they are reluctant, which I will come to later, but one of the areas that Amendment 18 seeks to clarify is our Government’s understanding of what our partner Governments need to do. On a visit last year to a country in north Africa, I met with its foreign affairs and trade representatives and MPs. A representative of the British Government who was present asked them explicitly whether they needed to change any of their domestic legislation purposes if they were then going to respond to what the EU was going to ask them to do, which was to consider the UK as a member of the EU for the purposes of international agreements during the implementation period—that is, on the basis that we have an agreement—and they were not able to answer. I suspected that this was now a routine set of requests from British government representatives of our partner countries.
My amendment asks for a report on what our understanding is of the domestic processes that those countries need to go through. If we know that, we are able to take Dr Fox’s statement at face value: they are simply not carrying the weight or working hard. Or, if we know that their own domestic processes are more complex than one may have thought, then we may have greater sympathy with the Government that this may be a more complex process than we had been led to believe.
In 2017 and 2018, we seemed to be living in a much easier world, because Dr Fox suggested at the Conservative Party conference, reportedly to cheers from activists, that it would be a breeze to get all the existing trade agreements in place before March. I remind colleagues that he said:
“believe me, we'll have up to 40 ready for one second after midnight in March 2019”.
He added:
“All these faint hearts saying we cannot do it—it’s absolute rubbish”.
That was endorsed on Twitter by the Minister’s predecessor, the noble Lord, Lord Price. When challenged on the basis that it might not be as easy as what Dr Fox had said, the noble Lord said on 24 October 2017, in response to someone saying that we would be out only on WTO rules:
“Ed we won’t only have WTO in event of no EU Trade deal. We will roll over the 60 odd other deals we are party to currently”.
Someone then responded that it would be difficult to do that. He then replied,
“All have agreed roll over”.
I just do not think that is correct. We now need absolute clarity because the clock is ticking.
When we debated this four months ago at Second Reading, I specifically asked the noble Lord, Lord Callanan, if the position of Dr Fox and the Government—that at the second after midnight next March they will all be ready—still stood. He replied:
“The Government’s position is exactly what the Secretary of State for International Trade said”.—[Official Report, 11/9/18; col. 2201.]
We need to know what the domestic processes are in those other countries and we need to know now very clearly, through a report, where we currently stand. That report should give the number, type, scope and extent of those agreements.
The agreements that we currently have in place are a mixture: free trade agreements; deep and comprehensive free trade agreements; economic partnership agreements; association agreements; stabilisation and association agreements; customs union arrangements—with Turkey and Andorra, which we will be discussing later on; interim economic partnerships; stepping-stone agreements; and modernisation agreements. We are also in the process, although they are not yet inked, of investor dispute mechanism agreements.
We have heard nothing at all from the Government about how we intend to roll over these different—in some respects, significantly different—types of agreements, and the consequences that that could potentially have on UK law. Dr Fox, in a slight moment of reality, said to the Commons committee that a simple rollover may not be as easy as previously stated. That is the only time—that I could find—where there was a degree of reality from the Government.
As I have said previously, the clock is now ticking. The Government still hold the position—if the noble Lord, Lord Callanan, is to be believed—that we are to transfer all of these agreements into UK law. They have not deviated from that position; indeed, Dr Fox did not even deviate from it this morning when he was asked, which is the latest information. So this report under Amendment 19 is necessary.
Because of the complexity of these arrangements and because some of them are very large—the totality represents 66% of UK trade—it is necessary, in subsection (2)(d) of the proposed new clause, for us to specify the consequences for the United Kingdom. In failing to replicate the terms of the existing agreements, it is necessary that we have a report which indicates the impact on the UK economy. Subsection (2)(a)(i) to (iii) in Amendment 19 means that there will be a much greater degree of clarity on what our partners need to do.
Finally, why is this even more important? At a lunchtime meeting that I had with colleagues in the House with a delegation from the Canadian Parliament, the Prime Minister’s trade envoy to Canada had a very interesting row with another Conservative MP. As a Liberal Democrat, the only good thing I could do was be an observer. The trade envoy said that one of the opportunities of rolling over the CETA agreement was to change it. That was immediately slapped down by the other Conservative MP who said, “No, we just need to get this through”. Our very close Canadian colleagues were bamboozled by this. They were also bamboozled when I asked them the same question that I am asking the Minister: what is necessary for Canada to implement this into their domestic legislation? So far, the Canadian Government have not indicated to their parliament that this is in the pipeline or that this is to be ready. Therefore, all I am asking is for the Government to tell us.
Now is the time for clarity—absolute clarity—not only for Parliament but also for businesses that rely on this trading relationship. I remind the Minister of the resolution of this House on Monday: that if this clarity is not provided then this Bill will not proceed.
Baroness Jones of Moulsecoomb
My Lords, when I first came to your Lordships’ House just over five years ago, I found some of the procedures absolutely incomprehensible. It has taken me a little time to find my feet. Quite honestly, a lot of those procedures lack common sense.
I do not understand why it was ever necessary to draft Amendment 19, let alone for it to be moved. It is common sense: of course we need this sort of information. It is asking for such basic information which, in any sensible universe, would be published as a matter of course. This is transparency which helps all of our businesses and our economy. We are now only weeks away from Brexit day, and we are still completely in the dark about all these things. There are many supply chains which depend on this sort of information. They depend on our existing trade arrangements. Businesses do not have the slightest clue whether they will be able to continue on existing terms in just two months’ time.
I would have thought that, if the Government had everything lined up ready to roll over these trade deals—which I very much doubt—then Ministers would be telling us about it and about what a great job they have done. The Minister would do a great service to the Committee, and to the country, by giving us a full account of where the Government are in these negotiations. It should not have to be an amendment to the Bill—it is so basic—but if the Government will not tell us then we have to compel them.
Lord Patten of Barnes (Con)
Could I just add to the points made by noble Lords? All this has been said before, when we discussed these matters a year ago. We were assured that everything was hunky-dory and that this process of rolling over existing trade agreements was going very smoothly. I recall one occasion when, after we had discussed it here, I was invited to a briefing by Trade and DExEU Ministers. They explained how easy it would be and took as an example one particular trade deal that I happened to know about because I had negotiated it as European Commissioner. I remembered how difficult the issues we had had to deal with were about rules of origin and surges in agricultural imports. Here I was being told that something that had taken us five or six years to negotiate would be negotiated, along with everything else, by the Department for International Trade.
Maybe between now and the end of March the department will get its socks on and go like the clappers, but somehow I do not think it will. I think that what will happen is it will redefine what the objective is, as Dr Fox was doing this morning. Dr Fox presumably knows the difference between a mutual recognition agreement and a free trade agreement, but this morning he was talking as though they were the same thing. I greatly sympathise with the Minister, because I do not think she will be able to enlighten us very much on the particular progress that has been made over recent weeks and months by our ubiquitous International Trade Secretary.
Baroness Hooper (Con)
My Lords, your Lordships’ House has the privilege of having as Members a number of former European Union Trade Commissioners. I am very happy that a least one of them is here and able to contribute from his specialised knowledge to our debate.
The Minister of State, Department for International Trade (Baroness Fairhead) (Con)
My Lords, I will address Amendment 18 first. I thank the noble Lord, Lord Purvis of Tweed, and all who have spoken in the debate. The themes from the noble Baroness, Lady Jones, the noble Lord, Lord Fox, and my noble friends Lord Patten and Lady Hooper are similar points. I will try to address them as much as I can. I also recognise the assertion from the noble Lord, Lord Purvis, that this is a probing amendment.
This is an important issue and I fully understand the need to provide some reassurance. I will try, as much as I can, to do so. I start by reiterating that we value and benefit from our international agreements, and we want to continue to co-operate with our global partners across a range of issues—not just trade but air services, climate change, international development and nuclear co-operation. As such, we are working with countries and multilateral organisations worldwide to put in place arrangements to ensure continuity of those international agreements.
We have agreed with the EU that it will notify treaty partners that, during the implementation period, the United Kingdom is to be treated as a member state for the purposes of these agreements. We think that this approach is the best platform for continuity during the implementation period across all agreements, but it would be for those individual third countries and multilateral bodies to determine whether any domestic action, including amendments to domestic legislation, is required. We do not expect that such actions will be required in every instance, but we understand that some parties, as the noble Lord, Lord Purvis, said, will choose and be required to take some internal steps where they think that to be necessary.
Baroness Kramer (LD)
My Lords, could I ask the Minister for clarification? Has she just said that she believes that, 10 weeks away from leaving, potentially under a no-deal scenario, the UK Government still do not absolutely know what steps are necessary in each of those countries with which we expect to roll over those continuity agreements, do not have them timetabled and are not tracking them in detail but have basically just stepped away and said, “We just hope, generally”? I would have hoped our diplomats were on the telephone daily to get these steps in place if they were necessary. But from listening to her, it sounds as though no such action, no such monitoring or pursuit, is taking place.
Baroness Fairhead
I thank the noble Baroness, Lady Kramer, for the further question, and will try to reassure her. The Government have been engaging actively with those third parties on that approach since it was outlined as part of the implementation period arrangements at the European Council of March 2018. But we must consider that a decision for those third parties, those countries themselves. Any action or internal measure taken is for them to consider based on their own domestic legislation and practice. Indeed—this is a critical point—some internal measures, given their very nature, may not even be public knowledge. For this reason, let me assure the noble Baroness that we agree it is right that we engage actively both with third parties and with multilateral organisations and encourage them to consider the steps needed for their own domestic legislation. This enables the continuity that, as the noble Lord, Lord Price, said, in principle they all fundamentally agree with, because it is in their mutual interest.
Moving into the future and the next 10 weeks, if we go to a new deal, this will have to be even more revved up, because we are hoping and planning for an implementation period. But as the noble Baroness will be aware, that would require an agreement, and therefore we must also have plans in place for no deal. We do not think it appropriate for the UK Government to essentially monitor a list of the actions over sovereign countries and hold them accountable. It would also be practically challenging for the reasons I have set out.
Lord Fox
I do not think anyone on these Benches has said that the UK Government should be holding the other Governments to account for these actions. We are asking whether you understand what the necessary actions are. Are you tracking them? Do we really know the critical path each agreement has to take in order to reach the golden point of Dr Fox’s magic moment when they all become reality? I think you are saying that you do not know what the path is, that you are not mapping that critical path and that therefore you cannot say how long it is going to take because you just do not know.
Baroness Fairhead
I say to the noble Lord that we are actively working and engaging with them. It is for them to decide. They have discussed with us what they currently believe. Some they are actively working through, some the third countries and bodies do not choose to make public—to us or anyone else. That is what I am trying to explain. I do not want this House to be in any doubt or to give the sense that we were just asking them and walking away. We are actively engaging with all the parties I referred to.
I now turn to Amendments 19 and 97. I will take those together, as they both—
Lord Hannay of Chiswick (CB)
Before the noble Baroness goes on to the next amendment, could she answer a question that I asked in the preliminary debate? In the event of us leaving without a deal, what tariff rates will the United Kingdom apply on 30 March to countries with which the European Union has a preferential trading agreement? That agreement will have lapsed as a result of our departure, so we will not be able to keep those tariffs at zero, as they are at now. The MFN rules of the World Trade Organization will say that we are not in a free trade area, a customs union or a preferential agreement with those countries. Have you told these countries what tariffs we are going to apply, and if so, could you tell us?
Baroness Fairhead
My Lords, I will try to do a little better than that. I can write to clarify, but my understanding is that in the Taxation (Cross-border Trade) Act arrangements were put in place for the GSP, the GSP+ and the Everything But Arms preference terms. As I keep saying, obviously our aim is to have an agreement and then an implementation period. Should there be no deal—which is not the desired outcome—the UK will need to determine what its policy is. That is not something that I am at liberty to discuss, as it has not been disclosed. Clearly it is not a place we want to go, but we will have to take that into account if we reach that point.
Baroness Kramer
I am sorry, but I must repeat a point that has been made by the noble Baroness, Lady Jones, and others. There are companies doing business that need to be signing contracts today, or fulfilling contracts on their books: they need to make financial provision, to put loans in place if suddenly they face unexpected costs, or to find alternative suppliers. There is a whole range of actions that those companies need to take. We cannot wait until we have gone over the precipice and then start to think about what we are going to do. We will have to have a regime in place at one second past Brexit. I do not understand the thinking behind all this. I do not know whether the Government have made a decision to keep this information from Parliament, for reasons that I do not understand but which may reflect some internal attitude towards secrecy and the way they want to handle Parliament, or whether they actually have not done the work and got any of the elements in place. Either is awful.
Baroness Fairhead
I believe that the noble Baroness has misinterpreted what I said. I did not say that we would wait until the end and that people would go into a chasm of not knowing. I said—I hope that I said it clearly—that our aim is to have an agreement and an implementation period. In the event of no deal, which clearly is not the preferred outcome, speed is of critical importance in trying to roll over the effects of the agreements that we have, to give that certainty and continuity to businesses.
The noble Baroness asked what would happen a second after midnight. We have published technical notices on the programme, we have attended multiple oral evidence sessions with the International Trade Committee, we have exchanged letters with that committee, which are in the Library, we have responded to all parliamentary Questions and we have made Statements in the House.
Lord McNicol of West Kilbride (Lab)
May I try asking the question asked by the noble Lord, Lord Fox, another way round? Are the Government concerned that any of the countries with which we want to roll over agreements cannot complete, or have concerns about completing, the rollover agreements, through their own Governments and Parliaments, within the next 10 weeks? If so, we should take the point made by the noble Baroness, Lady Kramer, about the businesses and industries working across and with those countries. They will be put in jeopardy if there is no agreement in place by one minute past midnight on 30 March.
Baroness Fairhead
My Lords, I can confirm that that is why we want to have an agreement with an implementation period. That is why it is definitely the Government’s plan A, while a no-deal scenario will bring real challenges. I hope that your Lordships would not accuse me of saying that there are not complications or that we do not need to go through many agreements. As I said in this House at Second Reading, it would be extraordinarily challenging to get everything done by 29 March—and I do not resile from what I said.
The noble Baroness referred to the future tariff policy and what happens if we get to no deal at one second past midnight. We are working to develop an independent tariff policy, but no decision has yet been taken on what the applied tariff rates will be post an EU exit, notably also in the case of no deal. We are looking at a full spectrum of options and will consider carefully all the evidence available before making a final decision in the interests of British industry and consumers.
Lord Purvis of Tweed
I wish to have one final go on Amendment 18. It is predicated on what the Government are working to, which is to have an agreement. That agreement will come with a request from the European Union to those third countries to treat us as a continuing member of the international trading agreements. The Minister has told the Committee that the Government know of countries where that poses no difficulty but also of countries which have said they do have difficulties. This means that, even in the event of leaving with a deal, some of our trading arrangements will not be in place after exit because those countries cannot put them in place. Which countries have indicated to the Government that that poses no difficulty and they will treat us as a continuing member of the international treaty, as the EU has asked? Which countries have said that it poses difficulties, and which have said that they do not wish to make it public?
Baroness Fairhead
My Lords, if I may address the point made by the noble Lord, Lord Purvis, if we leave with a deal there is an implementation period until the end of 2020. There is much greater confidence, as I believe this House would accept and appreciate, about getting all the arrangements fully continued and rolled over within that time period.
There are two issues here. The first is the notification by the EU that the UK is to be treated as part of the EU during the implementation period. The second is what third countries need to do to enter into continuity agreements. The first is a matter of third countries accepting that they will treat us in that way; on the second, we are engaged in detailed discussions with individual third countries to try to help them ensure that they are in a position to enter into the agreements on time. I stress, as noble Lords have highlighted, the difficulty of the timing if there were no deal.
Lord Purvis of Tweed
I apologise, but can the Minister then confirm whether my understanding is wrong? I understand that they will be asked to consider us as being in an agreement during the implementation period—to carry on treating us as if we were a continuing member of that organisation—but the Minister has said that the Government do not know whether all countries will do that. So, even if there is an agreement with the EU and an implementation period, there may be countries where the international relationships that we will have will not be in effect after exit day because the third country will not be in a position to treat us as a continuing member. The Minister has said that to the House. So all we want to know is which countries they are, because it is very significant if, even in the context of leaving with an agreement, those relationships might not carry on.
Baroness Fairhead
My Lords, what I can say is that all the countries we have spoken to have agreed with the principle of continuity. Therefore, one could expect that if they agree with the principle of continuity, they would see that that was a key part of making sure that their businesses and UK businesses—their people and our people—are protected.
Amendments 19 and 97 both concern the publication of a trade agreement progress register, so I will take them together. As agreed in the other place, the Government have already committed to lay reports in Parliament to explain any changes made to continuity agreements. These reports are intended to aid Members of both Houses to understand our continuity agreements. It is critical—as the previous discussion has just highlighted—that we do not delay the ratification of the agreements and unintentionally create a cliff edge for our businesses through a process addition. There will simply not be time, particularly with no deal, to create a detailed progress register in advance of bringing the majority of provisions in the Trade Bill into effect. That would be the effect of Amendment 97. As I stressed, we want to keep Parliament informed. Although we are committed to transparency and clarity in what I have laid out regarding our process reports, we are also mindful that we need to deliver the programme to time, and this additional reporting requirement risks delaying it.
Our Clause 3 reports are proportionate and will provide Parliament the transparency it requires. I take fully the comments made by the noble Lord, Lord Purvis, about the number of agreements—FTAs, EPAs, MRAs and association agreements. I have also laid out to the Committee some of the more technical aspects that we will cover, such as what happens with tariff rate quotas and rules of origin. I believe we will discuss those later today. Extensive work has been undertaken to ensure the continuity of our agreements for more than two years. We are engaged with our international partners to deliver this in the event of no deal. We have been working to deliver successor bilateral agreements with third countries and treaty partners, which in the event of no deal we would seek to bring into force from exit day or as soon as possible thereafter. Progress has been encouraging. Ministers and officials are engaging regularly with those partner countries to support and complete the work. As I said in the previous discussion, all have supported the principle of rolling over, because it is in their mutual interest.
I reiterate that we are aiming not to have any significant changes. As such, we believe there is little benefit in having a report analysing our continued participation in the EU FTAs. The vast majority of the elements are already being implemented, and our businesses are already benefiting.
The amendment in the name of the noble Lord, Lord Purvis, would require us to provide detailed progress on private Government-to-Government discussions. To provide such updates would create a considerable handling risk with our partner countries. As the noble Lord will appreciate, there are commercial sensitivities, and regulations and procedures in third countries, and we would not be able to commit to providing those updates without first seeking the agreement of the relevant partner countries. Again, this could end only in slowing down the negotiations. We believe these amendments are inappropriate and I ask the noble Lord to withdraw Amendment 18.
Lord Hannay of Chiswick
Is the Minister familiar with the practice in the European Parliament which currently applies? The committees of the European Parliament are briefed in detail about negotiations being conducted by the Commission. During the negotiations, how do you think they overcome these insuperable problems which the Government seem to see about doing that here? Nobody is saying that it has to be done on the Floor in a plenary session of this Parliament, but surely there has to be some way in which the Government account to a committee, as they go along, as to how negotiations are going. That is what happens in the European Parliament.
Baroness Fairhead
My Lords, I know the European process in outline; I cannot say that I understand it in the depth that the noble Lord, Lord Hannay, does, given his experience in that area. I want to differentiate between the continuity agreements and future trade agreements. Because we are talking about rolling over existing agreements, we expect to replicate the effects as closely as we can, so as not to disrupt trading patterns, so this is a different type of progress report. The noble Lord makes an important and valid point about the scrutiny of future trade agreements and we will discuss that later in the debate.
Lord Stevenson of Balmacara
I go back to an earlier question asked by the noble Lord, about whether or not the Government are in a position to notify those who are directly involved in this in a no-deal situation, which we all hope does not happen but in which we are out of the EU at 11.01 pm on 29 March, to be accurate. What conditions need to be satisfied before those who are directly involved in trade on that day and at that time get access to information about the proposed tariff arrangements? Absent that, we are talking about a very short period for those who have businesses to organise, decisions to make and loans to raise, as has been said. The other half of this is that if we are talking about continuity arrangements at that stage, when will we be in a position to know exactly how many countries are ready to do a deal with us at 11.01 pm on 29 March, how many are not and how many will take time to get their own arrangements sorted? Without that information we are not really in a position to judge whether or not the Government are making a good fist of this.
Baroness Fairhead
My Lords, on the 11.01 pm—or one minute past midnight—point, technical notices have already been sent out and no-deal planning has been ramped up, as the noble Lord will have seen in the Prime Minister’s announcement. Communications are planned for businesses and there are training programmes to make sure that the Civil Service and various departments are ready with information as required. Clearly, our primary focus is on achieving plan A and a deal, and therefore this is contingency planning, but that planning has been ramped up in the event—that we do not want—that there is no deal. I cannot say the exact moment that those notices will come out but I understand the noble Lord’s concern, and businesses’ concern, about what will happen in the following hour. Obviously, that will be taken into account.
As for third countries and where they are, I do not think I can add to what I said, which is that we are actively engaged and if there is a deal followed by an implementation period, we will be an awful lot more comfortable about the process.
Lord Purvis of Tweed
My Lords, I am grateful to the Minister and to noble Lords who have taken part. The Minister said that the Government will keep Parliament informed. Parliament has not been informed until now. We have no idea, because nothing has been presented to Parliament, about notification of the status of the potential agreements. We were not informed in advance about Switzerland, which is the only one so far; we have been asked simply to ratify it and to consider whether or not we accept what comes with it.
I tried to probe the Minister’s comments on Amendment 18. She told us that in discussions with third countries, if there is an agreement and the EU asks them to consider the UK as a continuing member of the European Union for the purposes of international treaties and trading agreements, the Government will not provide the information to Parliament on which countries that poses no difficulties for, which countries have indicated that that may require them to change domestic law, and which countries are refusing to make the discussions public.
Baroness Fairhead
My Lords, I have to rebut the statement made by the noble Lord that it would enhance relations with third countries if we reveal the status of the discussions and negotiations with them. It would be against the nature of most discussions with third countries. Many third countries have policies in which they do not permit disclosure of the discussions that are taking place. I just do not think that is a correct assertion. As for Switzerland and other—
Baroness Kramer
All these countries have negotiated deals with the EU. In the process of those negotiations, there was full transparency and exposure. It is not a case of reporting to the European Parliament; it can be read on the website. In relation to these exact trade deals, they are used to providing full disclosure every step of the way. They are not being asked to do something that is out of the norm. The secrecy is out of the norm, not disclosure.
Baroness Fairhead
Again, when countries are in the middle of negotiations, blow-by-blow accounts or reporting stages are highly irregular. I hear and understand this House’s concerns and I will see what more information can be given.
With Switzerland, it will not just be a case of ratification, then all done. As we committed to, parliamentary reports will be laid before the House so that it can see whether any changes have been made and, if so, what their impact is. Today, it was announced that a free trade agreement has been reached in principle with Israel. I say this not because two out of 40 is the vast majority but because I want to provide reassurance that progress is being made. As noble Lords will be aware, the agreement with Switzerland is one of our most important FTAs with the EU—in fact, it is the most important.
I hear the concerns and challenges from noble Lords across the House. We have provided information and I cannot say that there has not been transparency; we have been reporting to the ITC and through ministerial Statements. I will seek to find out what further information can be provided before or during Report.
Lord Purvis of Tweed
One element that concerns us is when Ministers move seamlessly from saying that this is merely a technical exercise to roll over existing agreements to, in the next sentence, saying that they are engaged in confidential negotiations—but what are they negotiating? If this is simply a technical legal exercise to ensure the translation of legal competences into UK law, what are the Government negotiating? As soon as Ministers say that confidential negotiation is needed, that should trigger the existing, proper processes of transparency. As the Government said, these agreements are existing agreements with the European Union. They could not have been made without regular updates to democratically elected bodies. That is what we are asking for; it is a modest request.
The Government’s response is concerning and has not provided the degree of clarity sought, especially since the public justification for why these agreements have not been brought forward to Parliament by the Secretary of State is to blame other countries. If we get to the next stage of the Bill, much more information must be provided by the Government because this issue is significant for our trading relationships. Until that point, we on these Benches will reserve our position. At this stage, I beg leave to withdraw the amendment.
Baroness Henig
“( ) A report under subsection (3) must be drawn up by an organisation independent of Her Majesty’s Government and must include an economic analysis of the impact of the changed agreement.”
Baroness Henig (Lab)
My Lords, I rise to move Amendment 20 and speak to Amendment 21. Both amendments touch on the important issue of transparency, which has already been raised.
According to subsections (7) and (8) of Clause 2, the powers to be taken by the Secretary of State to implement replacement UK trade agreements for existing ones covered by our EU membership may last for up to six years after exit day. At present, as we have heard, the Government are not obliged to provide any indication of progress on the implementation of trade agreements covered by Clause 2. Businesses great and small have rightly complained that they have been given insufficient information about which agreements will be in place on exit day and beyond. The Minister has told me that there has been consultation between the Department for International Trade, trade organisations and businesses, but I am not sure that it has been on a sufficient scale to allay businesses’ concerns.
I acknowledge that the Department for International Trade has been working hard to ensure that no agreements are lost on Brexit day, whether we leave with a deal or not. But the fact remains, as we have already heard at great length, that there has been a failure to provide this House and the other place with information on the progress of the rollover of trade agreements. Surely we should not have had to learn from the Financial Times that there is a possibility that many, if not most, existing trade agreements will not be carried over after 29 March in a no-deal scenario. The previous amendment, moved by the noble Lord, Lord Purvis, suggested the establishment of a one-off register of trade agreements to be covered by the Bill. Surely that would benefit us greatly in terms of both our scrutiny role and our ability to act on behalf of businesses seeking to know the state of play on trade negotiations.
However—again as we have heard—there can be no doubt that best practice requires the provision of regular progress reports. We heard on Monday, and have heard already this afternoon, about the information provided by the EU on its website, covering the progress of trade negotiations. For example, I have here a one-paragraph report on the 19th round of negotiations, held in October 2018, on an EU-China investment agreement, along with an expectation that the next round of talks will be held early in 2019. That is the sort of information being put out by the EU. I appreciate the issue of commercial confidentiality, but surely if the EU can provide such information on a regular basis, the United Kingdom should commit itself to doing the same, particularly given the concerns of businesses and the commercial sector, and the powers requested by the Department for International Trade in the Bill. That is the purpose of Amendment 21.
The second part of the amendment would ensure that the Government keep us up to date during each parliamentary Session by means of a fairly simple report. We are not talking about just this Session; this could go on for some years, so we are talking about every parliamentary Session. We should all be aware of plans and the likelihood of agreements being laid at particular times. We need early notice of issues that may prove controversial. I would have thought that any responsible Government would feel that this was a basic requirement for those who are tasked with scrutiny functions, such as this House, and for businesses wanting to know about progress.
The first part of the amendment is similarly based on the good practice we have seen in the European Commission. I am pleased that the Government propose to lay before us a report on the trade agreements they intend to implement, including the difference between existing and proposed agreements—but that does not go far enough in providing information to businesses and this House on the nature of the agreement. From what the Minister has told me I gather that, in the Department for International Trade, agreements will be scrutinised thoroughly by internal economic assessors. That is very good—but could the Government therefore be seen as marking their own homework? Might the Government not bring to our attention all matters of importance?
That brings me to Amendment 20. I would like to see the scrutiny also done externally. We should be provided with a full, independent report of the sort that would be typically be provided by, for example, the LSE or Sussex University, both of which have well-established trade policy expertise. That would detail the precise differences between existing and new treaties, if any, and—importantly—the expected economic impact of any changes. Without this information, it will be very difficult to judge whether an agreement is worth pursuing.
The Minister keeps saying that the treaties will be rolled over and will all be very similar, with no variation. I will give an example to illustrate my point. Let us say that a country covered by one of these agreements is prepared to sign a rollover only on the condition of a change in a regulation to allow a certain type of food to enter this country with reduced checks. This could have an impact on health, on United Kingdom domestic providers and, potentially, on other countries’ exports, including those of developing countries. In this situation, surely Parliament deserves to know the impact of the change and should be able to scrutinise its effects. The best way to do that, as far as I can see, is through the provision of an independent report.
Lord Stevenson of Balmacara
My Lords, my noble friend has done us a great service in introducing this amendment with considerable verve and in such detail that nobody feels it necessary to pick it up. I put on record that we support what she is saying. There must be an advantage in having a proper external scrutiny system. These things should be done with independence and a wider concern for the issues than can be done from internally within the department. My noble friend makes the point—others have made it before—that we have a long way to go if we are to emulate the EU in its current practices, let alone try to get best practice going. I hope the Government, if they cannot accept the wording here, will at least take the sentiment behind the amendment and think about how that can be brought forward, both in the narrow work required in the department and its relations with Parliament but also in trying to improve the way this information is made available to the wider world.
Also in this group, I have given notice of my intention to oppose Clause 3 stand part. The reason is not directly related to the amendment tabled by my noble friend Lady Henig, because the substance of what she proposes is very much in line with the work done in the Commons to try to improve the reporting requirements, and I do not dissent from that. My reason for giving notice of my intention to oppose Clause 3 stand part is that later in the Bill we will discuss the broader question of what happens when we are talking not about continuity but about free trade agreements more generally. At that stage I have Amendment 33, which gives in some detail a possible way of doing this. It is certainly not in any sense meant to be the prescriptive answer, but it does raise all the issues raised within the terms of the current procedures under Clause 3. When it comes to later amendments, I will also talk about Clauses 4 and 5.
Baroness Jones of Moulsecoomb
My Lords, I should have stood up earlier, but I was being polite. It seems the system set out in this Bill has been rendered obsolete by the passage of time and the sheer urgency with which the Government now have to act. The amendments from the noble Baroness, Lady Henig, do a good job of trying to plug some of the gaps, but I really think the Government have to go back to the drawing board on all of this. A government amendment is needed on Report that proposes a realistic set of procedures that can be used without undue delay while ensuring proper safeguards and accountability. This should not be a battle but something we can all work on together. This Bill has dragged on for so long that we all have the benefit of hindsight. A quite prescient question has emerged: where will the Government ever find time to use the procedure set out in Clause 3? I really think we need a lot more drafting on this Bill so that at some point we might get it on to the statute book.
Baroness Fairhead
My Lords, I begin by addressing Amendment 20, tabled by the noble Baroness, Lady Henig. The Government agreed in the other place to lay reports in Parliament to explain the changes made to continuity agreements in advance of any continuity agreement being ratified or in advance of the Clause 2 power being used. This amendment, which requires an independent body—albeit one with the stature the noble Baroness refers to—would place a considerable time constraint on the delivery of these reports, which would in turn have a really serious impact on our ability to bring those continuity agreements into force. The reporting requirement placed on the Government is intended to be an aid to Members of both Houses to understand the continuity agreements as the agreement text is also laid in Parliament for ratification.
The noble Baroness also raised the issue of standards and the potential to lower standards. We had a very long, detailed and comprehensive debate on standards on the first day in Committee on this Bill, and I want to reassure noble Lords again. EU standards come directly into UK law. We will remain party to international standards bodies under international law, as we are today. This Government have reiterated their commitment to high standards, which are both demanded by our consumers and the right policy for our country.
I turn to the idea of an independent report. Noble Lords with experience of trade matters will appreciate that these agreement texts are lengthy. The CETA text with Canada, including annexes, is about 1,600 pages long. The reality of the situation is that it is simply not feasible, in the time available, to generate independent reports before our agreement needs to be ratified. I again refer to what we have said: continuity is what businesses and our consumers are asking for. I appreciate the points that the noble Baroness, Lady Henig, makes. Our reports will provide relevant analysis on the impact of any changes made to those agreements. I hope these reports are helpful, both to the noble Baroness and to this House.
Lord Purvis of Tweed
I wonder if the Minister might just be able to clarify what may be my misreading of the legislation. The Minister said “any changes”. My reading of the legislation is that it is “any significant differences”. I wonder if the Minister might be able to say, because they are not the same.
Baroness Fairhead
My Lords, if the change is literally a cut and paste, I am not sure it would help your Lordships to have a report saying “‘EU’ changed to ‘UK’”. It would be changes seen to be of any significance. If there were any economic impact, that would be included in the report. The reports are designed not to take time in an exercise of proofing but to identify the significant changes and those of value for the House to be aware of. As the noble Lord correctly says, it does refer to “any significant differences” in “trade-related provisions”.
The continuity agreements will be subject to the procedure under the Constitutional Reform and Governance Act. This House will be able to use the contents of these reports to inform their engagement with that process.
I turn to Amendment 21, which requires the Government to provide updates to Parliament on the status of negotiations. I stress again that we do not expect significant changes. I have referred on many occasions to the technical changes on TRQs, rules of origin and other such changes that we will need to cover later. That, together with this very tight timetable—as I think we all agree—would mean that the level of reporting is unnecessary in relation to that programme.
The continuity programme is separate from our programme to develop a future trade policy. On that, there has been very active engagement with businesses and trade associations. We meet on a very regular basis because it is trade policy for them and therefore it is absolutely critical. For example, we launched four consultations on possible future trade agreements. The window for consultations has recently closed and we are currently considering stakeholders’ views, so there is active consultation both in person and through that. Any future trade agreements with new partners will follow a separate scrutiny procedure. It was set out in outline by the Secretary of State for International Trade on 16 July 2018, but I ask for the House’s indulgence because in group 19, later today, we will be discussing exactly the scrutiny of future trade agreements.
I understand that the Committee is keen to know what progress we are making on transitioning the continuity agreements. The noble Baroness, Lady Henig, referred to the ISDS update that was given by Europe. On the DIT website, we provide updates of the meetings that have taken place and of any working groups. I have a list here of all of the working groups and, where we can, we say what was discussed there. We are able to provide that level of transparency. I do not want to go back to the discussion that we just had about the private Government-to-Government discussions. I stand by the commitment that I made to the Committee on that last measure to say that I will look to see what further can be done. My understanding is that it could create a considerable handling risk for those countries.
I have listened with interest to the arguments and points raised by the noble Lord, Lord Stevenson, concerning Clause 3. As has been set out in great detail and discussed over the course of these debates, the Government are seeking to roll over the effects of the EU’s trade agreements as much as is practically possible. This is particularly important in relation to pre-ratification reporting requirements, as any potential delay could risk a cliff edge in those trading relationships. In supporting this process, we are producing reports which will explain any significant changes—as I said to the noble Lord, Lord Purvis—from the effects of our existing agreements to the new ones. We believe that this provides the transparency that Parliament has called for while also being proportionate. These reports will help Members of the House, businesses and the general public to better understand the impact of the programme.
I trust that the Committee will accept that this provides balance, but I repeat my commitment to see what further information we can give. Our amendment to produce these reports received support in the other place as a proportionate approach to providing transparency to Parliament. I hope that this reassures the Committee, and I ask the noble Baroness to withdraw her amendment. Additionally, I hope that noble Lords will agree that Clause 3 should stand part of the bill.
Baroness Henig
My Lords, I have listened very carefully to what the Minister has said. I take the point about speed, but at the same time the department is seeking powers for up to six years. Therefore, on the one hand we are talking about speed and on the other the Government are saying that they might need these powers for some years. That is my concern. If we are talking about longer than a few months, we need a proper communication strategy and a proper strategy for scrutiny. In a sense, the department cannot have it both ways: if it is seeking powers over a period of years, then it is only reasonable for us then to be able to say, “Well, what are the arrangements for scrutiny?” If we are talking weeks, that is fine, but since the Bill is seeking these powers for this length of time, I do not think it is unreasonable for us then to say, “So what are going to be the arrangements for scrutiny and discussion?”
On the matter of scrutiny, it is quite obvious from everything that has been said by a whole number of people, on both this and previous amendments, that so far the scrutiny arrangements are by no means adequate. They really are not: we have to look at this and return to this. I hope that the department itself will come up with something on Report. Clearly, it is something that we will have to look at.
On communication, I take the point about the website, but the fact is that if you talk to businesses outside this House, if you talk to people who are trying to prepare for 29 March, they do not feel well informed and do not know what is going on. Businesses do not feel confident; the Minister might want them to, but they do not. This is a very serious matter because all of these businesses, great and small—it is a particular problem for smaller businesses, of course—do not feel at the moment that they understand what they should be preparing for. It is undermining their profitability and we are causing huge problems with this. Therefore, I am really not happy with where we are at the moment.
I am not going to labour the points this afternoon, as we have already heard about them at great length before. We will have to return to this whole area on Report, but meanwhile I beg leave to withdraw the amendment.
Baroness Henig
Baroness Henig
My Lords, I will be extremely brief—I am sure that noble Lords will be happy about that—in moving Amendment 22 and speaking to Amendment 23. They are two very short probing amendments for the particular circumstances when Ministers do not feel the need to lay a report before the House. Once again, given the importance of trade agreements and the need for scrutiny, this is something that the Government need to consider carefully. Can it really be right for the Government to lay regulations before Parliament without informing us what they are and what impact they might have?
We can deal with the matter fairly straightforwardly. The Government will know in advance of the proposed changes to an agreement, not just at the point of laying it. There is therefore no reason whatever why we cannot be told what the change is at the time, as part of whatever reporting system there is. That is the purpose of Amendment 22.
In relation to Amendment 23, I say that the phrase “as soon as possible” is far too vague. I appreciate that the Government have many issues to consider and to juggle, but they should have the means to tell us what is being proposed. We need to know within a clear timeframe so that we can scrutinise the Government effectively. I have to hear a convincing reason from the Government as to why they need the wide-ranging powers under this clause. I therefore propose these amendments to seek further information from Ministers, and to signal the kind of openness and levels of scrutiny that I am sure Parliament will demand in terms of both these rollover agreements and the new trade agreements. I beg to move.
Lord Stevenson of Balmacara
My Lords, once again I support the amendments of my noble friend Lady Henig; I will also speak against Clauses 4 and 5 standing part of the Bill. Counterintuitively, I will deal with Clause 5 stand part first, simply because it follows exactly in the same vein as the reasons I gave for suggesting that Clause 3 should not stand part. Clause 5 deals with reports to be laid with regulations under Section 2(1). In an expanded, more amplified and better and more rounded policy dealing with both the continuity of free trade agreements and the new free trade agreements, we would have a completely different system sitting in place, so Clause 5 would be otiose, which is why I put this forward. I will not press this and I do not need much response from the Minister because we will return to this issue later in group 13.
However, I wonder about Clause 4. It seems at a superficial level to give the Government a “get out of jail free” card in relation to any reports that they might feel obliged to make, particularly if they are expanded in terms of my noble friend Lady Henig’s original proposal under Clause 3. Clause 3 states:
“Before the United Kingdom ratifies the proposed agreement, a Minister … must lay before Parliament a report which gives details of, and explains the reasons for, any significant differences between—
(a) the trade-related provisions of the proposed agreement, and
(b) the trade-related provisions of the existing free trade agreement”.
But Clause 4 states:
“Section 3 does not apply to a free trade agreement if a Minister of the Crown is of the opinion that, exceptionally, the agreement needs to be ratified without laying before Parliament a report which meets the requirements”.
I stress that phrase,
“a Minister of the Crown is of the opinion that”,
and the use of “exceptionally”, which is an interesting word. In other words, you do not have to do it if you have sufficient gravitas and the ability to convince Parliament that you are not of that opinion and that it is exceptional, so you can get away with it. That is not satisfactory drafting.
This is not a good clause to be in a Bill of this nature. It certainly does not meet the questions that we have been raising about proper transparency, accounting and independence of reporting. When the Minister comes to reply, I hope that she will consider taking this away. If she cannot bring herself to agree that this needs redrafting, perhaps she can write to me explaining why it does not.
Baroness Fairhead
My Lords, I too will try to give a short response to the amendments before us, and first on Amendment 22 tabled by the noble Baroness, Lady Henig. Clause 4 creates an exemption from the reporting requirement so that, in exceptional circumstances, the Government may seek to ratify an agreement without having first published the associated report on changes made to it. Let me categorically reassure noble Lords that we intend to draw on the reporting exemption provided for in the Bill only if we are in exceptional circumstances.
I am sure the Committee will agree that we may find ourselves in exceptional times. We cannot predict the speed with which continuity agreements will be ready for signature. Moreover, the exemption is narrow. It does not remove the requirement for a report to be laid. It simply provides a little leeway to enable a trade agreement to progress to avoid a cliff edge. The Government would still be required to lay a report as soon as possible following ratification. I hear the noble Lord, and will reflect on the drafting, but in a sense it was because of the uncertainty about the speed.
Amendment 23 would ensure that, if this exemption is invoked, the report would have to be laid no later than 10 days after ratification. Again, to be clear, we have drafted this exemption for use in only the most urgent of circumstances. If we were to need to rely on this, it would be necessary to ensure that we could continue to operate in the most uncertain of contexts, and avoid that cliff edge.
Clause 5 will ensure that the Government lay their report 10 days in advance of using the Clause 2 power to implement any obligations of a continuity agreement. That will ensure that Parliament is wholly informed about how we intend to deliver continuity for an agreement before it is required to consider implementing legislation. If we removed Clause 5, as the noble Lord, Lord Stevenson, suggested, the Government would not be bound in any way to report, so we should set that aside.
Before I conclude on this point, I would like to inform the Committee about an amendment that the Government will bring forward on Report. As the Committee is aware, the purpose of the Government’s trade continuity programme is to seek continuity of the effects of existing EU free trade agreements as far as possible as we leave the EU. The vast majority of these existing trade agreements, which we are part of as an EU member state, are already in operation and have been scrutinised by Parliament. Let me make it clear to the Committee that we do not expect to need to change existing domestic equalities legislation as part of this programme. In the unlikely event that we choose to make minor or consequential changes to this legislation, we will aim to ensure that this does not result in reduced protection against unlawful discrimination or diminution of equality rights.
However, to ensure suitable transparency and accountability on this particularly important issue, we intend to provide that a ministerial Statement is made alongside any draft statutory instrument laid under the Clause 2 power. The Statement would outline whether the statutory instrument repealed, revoked or amended any provision of the Equality Acts 2006 and 2010 or any subordinate legislation made under them. In addition, I am happy to confirm that the reports under Clause 3 will explain any changes that would be required to equalities legislation as a result of our shift from an EU to a UK agreement if, and I stress if, any changes are needed. My officials have agreed to work together with the Equality and Human Rights Commission—and I put on record our thanks for its efforts in helping us to design the process so far—on designing the content and templates for these reports.
I hope that that reassures the Committee and I ask the noble Baroness to withdraw her amendment. Additionally, I commend that Clauses 4 and 5 stand part of the Bill.
Baroness Henig
I thank the Minister for her response, and particularly for the additional information that she has just given us, which I am sure we welcome. As I said, they were probing amendments on my part and I was trying to get some more detailed information about the Government’s thinking, which I think we have had. On that basis, I am happy to withdraw my amendment.
“Customs union
It shall be the objective of Her Majesty’s Government to take all necessary steps to implement an international trade agreement which enables the United Kingdom to participate after exit day in a customs union with the European Union.”
Lord Stevenson of Balmacara
My Lords, this amendment, for which I am grateful for the support of the noble Lords, Lord Patten of Barnes, Lord Purvis of Tweed and Lord Kerr of Kinlochard, has a long and distinguished history in that it has been discussed over a number of years. In moving it today, I first apologise for the drafting. It was devised by committee, which of course is never the right way to go about these things; it was a very good and small committee, but nevertheless the drafting reflects some of the tinkering involved. It probably does not stand the test of time and, if we were to return to this at a later stage—and we might want to do that—slightly different wording might emerge. But in proposing it I am in no sense worried about the central principle. I hope to spend a little time introducing the amendment and will then listen to the debate that comes forward.
The question of whether the UK should remain in a customs union has become an issue around which many people can agree. It does not involve them all, but includes many MPs, businesses, trade unions and the wider public. The reason is not hard to find. It would provide the certainty that we need to protect UK jobs, secure opportunities for our industries and create prosperity at home. It would also give us a voice, front and centre, at the world’s most powerful trade negotiations and help to ensure that global goals on development, climate change and the natural environment are met and continue to be met. On Northern Ireland, Ministers are bending over backwards to explain how exactly the backstop they have agreed to and have been supporting will actually work in practice. But at a stroke, a customs union would properly guarantee the peaceful legacy of the Good Friday agreement. That alone must make it a most important issue.
At present, the Government are steadfastly ruling out a new customs union. However, the trade unions, the CBI and other business interests are highly supportive of the idea, saying that a new customs union will protect jobs. The Scottish and Welsh Governments are also on board, as are a growing number of members of the Cabinet. At a time of seemingly insurmountable division in our country, the opportunity to unite in common purpose should be grasped with both hands. I beg to move.
Lord Kerr of Kinlochard (CB)
My Lords, I can be very brief in supporting this amendment, which has my name on it. Saying that is a very ominous start; it usually means the exact opposite, like the phrase “with the greatest respect”. But I can indeed be very brief because, on 18 April, I proposed and the House approved, by a majority of 123, a very similar amendment on the European Union (Withdrawal) Bill. With the greatest respect, I have to say to the Government that we would not be in the present predicament if they had listened to what the House said on 18 April.
The economic case for a customs union if we leave the European Union is pretty well understood now. Business is explaining ever more volubly how damaging supply chain disruption would be. With the greatest respect for No. 10, I do not believe that the red line against a customs union would have been drawn in the 2016 party conference speech had there been any consultation with business, Parliament or the Cabinet beforehand. The political case for a customs union has become even more familiar as we think about the concept of a customs frontier across the island of Ireland and a backstop with a frontier down the Irish Sea. With great respect, I have to say that it was unfortunate that the 2016 announcement of the red line on a customs union, interpreted in Dublin as a declaration of intent to abrogate the Belfast treaty, was made without any advance consultation with or notification to the other parties to the treaty, and with no consultation with this Parliament or with the Northern Ireland Assembly, which at the time still existed.
Taken together, the economic and political case for a customs union, if we leave the European Union, looks pretty overwhelming—but I see no reason to labour the point now. I recognise that the Minister cannot accept the amendment, and we all know that much may have changed before the House considers this Bill again on Report. I simply urge the Minister, with the greatest respect, to ensure that her colleagues remember how this House voted on 18 April.
Lord Patten of Barnes
I am happy to support this amendment—although I realise that happiness is a relative concept. We find ourselves going round and round these arguments, again and again, banging our heads against the same walls of confusion and obfuscation, and barely managing to avoid Brexit derangement syndrome as we make this tiresome journey. As the noble Lord, Lord Kerr, said, we have of course been here before—several times. The most notable is the debate we had, as he said, in April last year, when all of us were younger. Indeed, one or two of my noble friends are no longer here—permanently—since that debate. On that occasion, we won the amendment to the withdrawal Bill by 123—not 230, the sort of figure that we are used to these days, but by a pretty comfortable margin. As the noble Lord said just now, if our advice on that occasion had been taken, we would not be in the shambles that we are in today. One reason for discussing this issue again is that it is quite possible that a customs union, among other things, will be part of a way out of the shambles that we are currently in.
In an article in the Times a couple of days ago, the admirable commentator Rachel Sylvester reminded us that Einstein defined insanity as continuing to make the same decision on the assumption that it will get the result you want and therefore continuing to be disappointed. I suppose that, by that definition, one of the steps you take towards insanity is that you start quoting your own speeches, and most of us have made these arguments again and again.
I want to make four very brief points in the hope that we do not have to spend the rest of our lives talking about customs unions. My first point is this. The argument that we have to do this because of the referendum result—that this is a red line that cannot be painted any other colour—is an assertion. As the noble Lord, Lord Kerr, said, it was an assertion made in a party conference speech, where it is not always the case that objective truth or consensus is looked for. The party conference speech then became an item of sacerdotal interest. It was put into the manifesto before the 2017 election—in which our party did not do conspicuously well. We are told that we have to implement a proposal to get rid of any customs union because of that party manifesto.
I had a great deal of pleasure rereading that manifesto. Right at the beginning is the sentence:
“People are rightly sceptical of politicians who claim to have easy answers to deeply complex problems”.
I would certainly settle for that. There were one or two notable items in the manifesto, and my noble friend Lord Lansley and I have written more manifestos than most people have had hot dinners. I seem to remember that pledges were made that were dropped even before the election, including a very good proposal, which I supported, about funding healthcare for the elderly—a subject in which I am sure I will soon be much more interested than I am now. The idea that this is a tablet of stone, engraved with the absolute commitment, whatever happens, to deny the country a way out using a customs union, is ridiculous and risible.
My second point is about the belief that, somehow, we can manage everything as we go forward without any deal, and certainly without being part of a customs union. It is part of the Catch-22 situation that we find ourselves in now. If you say that there are problems in leaving the EU and the customs union without a deal, you are told that there are no problems. If you do not say that there are problems, you are told that there are no problems. It is rather difficult for us to find a way through this Catch-22 situation. The notion that we can manage in the future simply on WTO terms is, of course, ridiculous. No developed country in the world manages solely on WTO terms. We talk about Europe’s agreements with America being on WTO terms; they are not. There are 100 sectoral agreements with the United States, which go well beyond WTO terms. The truth is that, in addition to the WTO terms, other things are necessary to secure the best possible advantages for your exports and for your industry. That is why, since the WTO was established, 243 different trade agreements—substantial ones—have been made by countries to secure their economic interests. Crashing out and pretending that we can manage simply on WTO terms is, again, a ridiculous proposition.
The third thing one should recognise is the difficulty of putting together a trade policy at the speed that we are trying to now. That became apparent in a debate we had earlier this afternoon. I say without, I hope, being remotely patronising to the Minister that she has the impossible job of marking Dr Fox’s homework. On the basis of what we know so far, the House would not have given him a pass: he would not even have got into the margin of error.
The issue is so difficult. From the European point of view, it involves a great deal of transparency. If the noble Lord, Lord Mandelson, was in his place, he would be able to confirm that. I used to do the political side of trade agreements. We would go back, again and again, to the European Parliament and to parliamentary committees to be quizzed about what exactly we were negotiating. Quite rightly, one of the most pressing invigilators every time was the British Minister: we were pressed on the details of the negotiations as we went along.
When we were told by Dr Fox, in between flights, that there would be 40 trade agreements ready for lift-off within seconds of leaving the European Union at the end of March this year, some of us were a little cautious in taking his word for gospel truth because we had seen what had happened with his previous prediction that negotiating with the European Union was going to be incredibly straightforward. Now, however, we know what the score is. It is not 40, not 39, not 29 and not 19 and a half—we have hardly made any agreements.
If we crash out of the European Union on 29 March, it will be extremely painful for British business and industry. There are all sorts of issues. The Minister said quite properly that these are very big agreements. She said that the Canada agreement is 1,600 pages long and the South Korea agreement is 1,400 pages long. As we have said before, you cannot simply go through them Snopaking “European Union” and inserting “United Kingdom”. All sorts of really complicated issues have to be dealt with and that will take a very long time.
If we look beyond just rolling over those trade agreements, what else are we talking about? We are talking about capturing a huge share of the big markets: China, India and the United States. At the moment, China is not the easiest place to do business. The indebtedness is now 300% of GPD, which may look even more difficult in the future, and there are, alas, increasing security and political issues that we have to cope with. Then there is India. If he was in his place, the noble Lord, Lord Bilimoria, would tell us, as he has done with great authority in the past, that what the Indians are interested in is visas, not concessional trade deals with the UK. Then we have the United States. If my noble friend Lord Deben was in his place he would give us a speech on American chickens that would make any sentient human being become vegan. He has done it two or three times, and it is a very moving piece of rhetoric, as one would expect from my noble friend. The idea that we can build a tower on the sand of President Trump’s meretricious and mercantilist policies is an absurdity. An independent trade policy was why we said we had to reject a customs union, so where is it? It remains an aspiration of our ubiquitous International Trade Secretary and one which, alas, we are not going to see consummated in the foreseeable future.
My final point is on Northern Ireland, which we have talked about again and again. Both previous speakers pointed out that the problems of the Northern Ireland border would not exist if we were in a customs union. In the referendum campaign, the Prime Minister, to her credit, made absolutely clear what she thought of the Northern Ireland border issue and how important it was for the future and integrity of the Good Friday agreement. She was right. The other day, my noble and learned friend Lord McKay explained with spectacular clarity why there would have to be a hard border between the Republic of Ireland and Northern Ireland. Guess what: if you have one set of trade and customs arrangements in one country and a different set in the country next door, you have a hard border. It is the case everywhere. Search parties have been sent out to find an example of where it is not true and to find a technological solution—and answer came there none.
The Lord Bishop of Chester
My Lords, it is always a pleasure to listen to the noble Lord, Lord Patten of Barnes, especially when religious imagery creeps into his speech with gospel truth and sacerdotal approaches. His opening remark reminded me of Trollope’s definition of hell: an eternity of listening to one’s own sermons. I do not know whether the noble Lord, Lord Patten of Barnes, has similar feelings about his speeches, but they are always wonderful to hear.
I wonder what this amendment really means. The noble Lord, Lord Patten of Barnes, said that happiness is a relative concept, but it seems to me that the term “customs union” can mean more than one thing. The very fact that the amendment refers not to “the customs union” but “a customs union” prompts me to ask what it means precisely. If one looks, as I just have, at the WTO website and how it defines a customs union, it is not a hard-and-fast term and allows for exceptions, up to a point, to be made in an agreement. It refers to “substantial agreement” on issues of trade.
When one comes to the political declaration, what is the real difference between the following aspiration in the political declaration and a customs union?
“The Parties will put in place ambitious customs arrangements, in pursuit of their overall objectives … making use of all available facilitative arrangements … ensure no tariffs, fees, charges or”,
so on in the trading arrangements. It seems to me that that is not far from describing what might be called a customs union. No doubt the devil will be in the detail as to precisely what is included or excluded, but it seems to me that the Government’s intentions, and the agreement’s intentions in the joint political declaration, are not far off what one might describe as a customs union.
Lord Purvis of Tweed
My Lords, I hope that the Government will listen to what the noble Lord, Lord Patten, said in his contribution. The difficulty is that, even those in Government who listen to such a sensible case, find themselves locked into a situation where even sensible ways of maintaining a relationship with the European Union outside the European Union have been defined by many as “not leaving”. So the scope for leaving the European Union has become narrower and narrower.
One of the slight advantages of the delay to this legislation and the opportunity to debate a customs union now is that many of the prior assertions have been utterly debunked. Many of the valid concerns raised about leaving the European Union and its customs union have now emerged in reality. The then proposed “max fac” solution has been laid bare as simply unworkable. The Chequers agreement would not pass any definition of a sensible way forward. The White Paper which was then published had major deficiencies, and we saw the result of the Commons vote on the agreement. So we are left with a number of differing perspectives on the future trading relationship and customs arrangements on which we will need to find some form of common ground.
In previous discussions, we have heard from the Government that all these concerns can be set aside because of our positive relations with our trading partners—Dr Fox said that on the radio today. Canada has often been cited as a country which finds it very straightforward to have a positive trading relationship with one of our closest possible allies, especially as CETA has already been agreed by this Parliament. No doubt, there will be good will on both sides in these discussions. This is beyond question. We will trade with our close allies. However, Canada has prevented our schedules application at the WTO from progressing. It has lodged an objection. It is looking after the interests of Canadian farmers and industry—the United Kingdom would do exactly the same.
If we leave without any agreement, and if Canada, New Zealand and Australia do not withdraw their objections to our goods schedules at the WTO, then not only will we leave the European Union without an agreement, we will leave without any certified WTO schedules. We will not only be trading on WTO rules, but we will not have certified rules with which to trade with the rest of the WTO. The same has happened this past week over our services schedule—services are two-thirds of the UK economy—because Taiwan has lodged an objection. So the dawning reality must be that a change of course is necessary.
It is of no surprise to anyone that Liberal Democrat policy continues to be, as it always has been, to retain membership of “the customs union”. It is Labour policy currently to negotiate “a customs union” with “the customs union”, such as Andorra and Turkey have. It is the Government’s policy, or at least the Prime Minister’s though not necessarily the whole Cabinet’s—it is difficult to determine, between the Chancellor and Dr Fox, who speaks for trade now; it is significant that, at Davos, in one week, you have two Cabinet Ministers from one Government saying two different things at a critical time in our country’s history—that we negotiate a deep and comprehensive free trade agreement with a customs arrangement as part of it.
We propose that, ultimately, the people will have to decide on our preferred option. Under Labour, Article 50 would need to be revoked and a new negotiating mandate would have to be agreed at EU level, as the Prime Minister’s letter activating Article 50 is not competent—it states that withdrawal would be supplemented by a free trade agreement, not a customs union. The Commission’s negotiating mandate has not been on that basis. The Government’s position was defeated by the biggest majority in Commons history.
The Government’s position is predicated on making agreements with all other countries with which the EU has a trading relationship but without them knowing what our trading and customs arrangements will be. Reflecting on the previous debate in Committee, perhaps the biggest reason why those agreements will not be brought forward before exit day is the very sensible position that third countries are taking. They will not enter into agreements with us, even if we say they are simply a rollover, because these could well become permanent without them knowing what our relationship with the European Union is. Who can blame them? Perhaps Dr Fox can, but who really can blame them?
We know that the withdrawal agreement and the political declaration state that the future relationship will be based on the Northern Ireland backstop, which means that we would not deviate from the EU in our trading. It seems that the Prime Minister’s course of action now, in order to get an agreement through, is to remove the very thing that would offer reassurance to countries with which we have a third-party trading arrangement. The backstop would clearly break the “taking back control” mantra, so to some extent it is not surprising that many on the government side, in the Conservative Party, have said that this is actually not leaving the European Union at all. So it is hard to see how they move forward now.
Labour’s position is based on Turkey, where agriculture is excluded and where the country is obliged to use EU rules and abide by the European court’s interpretation of them. To some extent, this also means having the European court’s remit over our future relationship. Turkey’s agreement with the European Union explicitly excludes Turkey deviating from the EU’s internal regulations; it is bound by them. If negotiating “a customs union” with the European Union were to have any preferential terms over participation in decision-making, the European Union would then be bound to offer them to Turkey and Andorra, which it will not do. This is one of the difficulties about which we have to be open.
Labour’s position of being aligned with the single market but not part of it means that with the movement of goods comes the movement of capital, which also means some form of people movement. It has not said this so far, but I think we now have to be in a period of openness and honesty. This is clearly within the scope of the European Court of Justice—which Jeremy Corbyn has ruled out. Many people also say that this is not leaving the European Union. It does not remove the need for border checks. Some of the longest delays in border checks in Europe have happened between Turkey and Bulgaria—two countries which are part of a customs union. So, if we want British representation in a customs union, with British oversight and decision-making, and a seamless trading relationship with 49% of our trading partners and a further 17% of other countries with which we have trading relationships without tariffs, we have to retain membership of the customs union.
If the impossible government position is termed “not leaving”, and if Labour’s position is termed “not leaving”, then I think not leaving would be better done after the people have agreed it. Now the reality that we are embarking on is clear. For the first time in history, a country is seeking a trading arrangement with new barriers, additional regulations and enhanced restrictions. It is the first arrangement ever knowingly entered into that would reduce prosperity. This is the Government’s course of action outside the EU’s customs union.
Lord Lea of Crondall
I have been listening to this brilliant speech, and I am just wondering whether I can believe my ears. We are talking about an amendment to a Trade Bill in the context that the Government are trying to put through a withdrawal agreement. Given the complexity of the question of “the customs union” and “a customs union”—there is an element of angels on the end of a pin—if we in Parliament are having difficulty in thinking through its various intricacies, how does he think it is going to be easier for the people to do so? Is that what he has just said?
Lord Purvis of Tweed
It is. Ultimately, I believe that the choice is going to be that we either stay in the customs union and the single market of the EU or we leave, either with no agreement at all, which I hope is ruled out in short order very quickly, or with some form of government agreement, which did not secure majority support in the other place, where one-third of those voting against it did not believe that it was leaving the EU at all. I think where the people will now be informed in the decision is as I started: many of the issues are now laid bare about the consequences of leaving.
I am very happy to be a co-signatory to this amendment. I am very pleased that we in this Chamber are debating what the consequences of the actions will be. We are also clear that we want to do the least damage to the British economy and to secure for the future all the relationships that we have at the moment without the extra burdens of regulatory addition.
My final point, which the OBR report in October made very clear, is that if we went down the Government’s course and left, then there would be at least five years of adjustment to a worse scenario for GDP, even on the basis of the agreement. I am seeking to avoid that. I hope there will be consensus, at least in the first instance, that a customs union is necessary. There is no doubt of our position on these Benches that the customs union is preferable to all of those. I hope that will ultimately be the future of our country, and I believe that that is up to the people, who ultimately will have to decide this.
Lord Lansley
My Lords, I do not want to go on at length about this issue, not least because I agree so wholeheartedly with what my noble friend Lord Patten of Barnes has already said. I am always loath to do it and I hope to make it a very rare event, but I voted for the amendment to the withdrawal Bill last April. To that extent, I think this House has made its view perfectly clear: it thinks, in the context of leaving the EU, that to retain membership of a customs union with the EU would substantially mitigate what would otherwise be the damaging economic effects of withdrawal.
I do not want to get into a debate about “the” customs union or “a” customs union but, on the face of it, if we are negotiating to leave but we are negotiating to have a customs union relationship with the EU, it behoves us to negotiate without necessarily subscribing to the customs union because the customs union is a product of the treaty. We would no longer be bound by the treaty, so we have the flexibility to think otherwise. That does not turn us into Turkey, because we might choose to do things quite differently. The EU has chosen not to have agriculture within the customs union with Turkey because it is in its own interests not to do so. We have very different interests and we might choose to pursue them differently. Indeed, as one can see from the structure of the backstop, we might choose to have an arrangement with the EU that was, as Ministers are fond of saying, a “bespoke arrangement” for the management of a customs union. And why not? If we could have such a thing under the backstop, surely we could have it without the backstop.
I do not want to go on at length. I hope that those in this House and beyond who are thinking next week about what is needed to make progress from the impasse that we appear to be in at present will read this short debate. While it exposes some of the difficulties in negotiating a future customs relationship with the EU, two things should become immediately apparent. First, many of the negative consequences of leaving the EU—most especially, leaving without a comprehensive agreement in place—will be dramatically mitigated by being in a customs union. When I talk to businesses, that is absolutely at the top of their wish list, and it is true for manufacturers as well. Secondly, I hope people will realise that this does not preclude us having a trade policy of our own. What are trade policies nowadays? They are generally called comprehensive economic partnership agreements because by and large they are not about tariffs; they are about broader relationships. Especially for the UK, given that we are predominantly a services economy, for the future those agreements should be about services. We should be negotiating trade agreements about services, the movement of capital and investment, and indeed we should have a negotiation with India that includes a discussion about the mobility of workers between India and other countries. That is happening in a very powerful way: the Indians are exporting skilled young people all over the world very successfully, and we should have that in mind as part of an economic partnership agreement with other major economies. If that is true and it also gets us out of having a hard border between the Republic of Ireland and Northern Ireland, but without creating a new border between Northern Ireland and Great Britain, why would we not want to do this? That is what everyone is trying to arrive at.
For the purposes of next week’s debate there are, therefore, essentially two questions. First: does offering to be party to a customs union with the European Union, as part of the future political declaration, enable us and the European Union to agree in a way that would—as they say in Brussels—have legal force? Would it enable us to put into the political declaration, and have agreed by the European Council, the kind of language and commitments that would allow it to be said that we will not enter into the backstop, if we go down that path in the future treaty? That is what it is all about: not going into the backstop in the first place. We need some reassurance that that will happen. That will automatically solve the essence of the problem associated with the backstop. If we do not have to go into it, we will have solved that issue. We will also have solved the question of unilateral withdrawal or otherwise. If we are in a customs union, we have a right to leave it. If we go into the backstop, we have no right to leave it—as it is currently constructed— and that is a very unhappy place for many who are against the withdrawal agreement at the moment.
The second question is: can we avoid the Turkey situation? It is a bit like when people talk about entering the Norway situation: we do not want to be in a position where we are simply rule-takers. With a customs union, at least we are not rule-takers on financial services and our service industry, but we are none the less rule-takers. We do not want to be in that position. Can we arrive at a customs union where we genuinely have a shared responsibility? I hope we can.
The trouble is, I entirely agree with my noble friend Lord Patten. Nearly a year ago, if only the Government had listened and put into the negotiation—at the time that led up to the White Paper and after it—a discussion about a customs union. Instead they put into the White Paper the suggestion that we could have a customs union, without calling it that, where the rules of origins are effectively waived so that anything that originates in the United Kingdom is treated as if it is European, and anything that originates in Europe is treated as if it is British. This, of course, is a nonsense; the European Union would never accept it. It would never accept that it would raise the money—
Baroness Kramer
I am trying to understand the noble Lord. Obviously, the definition of a customs union is quite difficult and I was trying to follow his definition. Does he intend only the narrow definition of a customs union, where it essentially just deals with issues such as tariffs and excise duties, or does he intend it to include the regulatory alignment, as it often does because the terminology gets stretched? If there is not regulatory alignment there still have to be checks, which means we are back to the border problem. Would he explain what he sees as the content of “a customs union” because, if we are not removing the border problem, I struggle to understand his point?
Lord Lansley
When I talk about a customs union, I mean—as the WTO would interpret it—where we share a customs territory and an external tariff arrangement, and our tariffs are the same as the European Union’s. A customs union, in my book, does not necessarily imply having the same rules, regulations and standards. If we are in a customs union with the European Union, it does not mean that we do not have a comprehensive partnership agreement with them. I hope we would do and that would embrace everything from data adequacy to having the same standards. Therefore, we would have to work on the basis that we start with and maintain standards at least as good as those inside the European Union, enabling the European Union and ourselves to operate on the basis of open borders. The most important part of that is the absence of a requirement to establish rules of origin, because one is in a single customs territory that allows goods to pass across borders in that way.
I will finish my point. I am losing quite where I was; I think I was just beyond talking about Turkey. We have got to know that we are going to be in a position to be able to negotiate a customs union, that we will be able to withdraw from it in future, and that it will obviate the need for us to have a hard border with the Republic of Ireland. That is a really important position. We need to know these things and we should have had months to negotiate them. As it is, we have to arrive at something in the political declaration in weeks rather than months.
Lord Hannay of Chiswick
My Lords, I will not go into the matter of the definite or the indefinite article, which I think is getting a little abstruse. The right reverend Prelate asked why there was a focus on the words “customs union”. It is because that is one of the two ways under Article 24 of the World Trade Organization’s rules—a free trade area, or a customs union covering substantially all the trade—which permits a member of the WTO in good standing to derogate from the most favoured nation provisions. It is as simple as that. All that waffle in the political declaration, which had to be put in because “customs union” would have frightened too many horses, is quite meaningless. “Customs union” is totally meaningful.
The Lord Bishop of Chester
Could I check with the noble Lord: is he agreeing with me that the political declaration actually describes what might equally be described as a customs union?
Lord Hannay of Chiswick
That question should perhaps be addressed to the Prime Minster, who might find some difficulty answering it because it would cause such ructions on the Back Benches of her own party. I do not think it is a question for me: I would have no problem putting “customs union” in. That is why I am standing here now, suggesting that this legislation should contain that phrase. If we leave the EU—if—on 29 March or at a later date, then the option of staying in a customs union is a compelling one, and it ought to figure in this legislation.
Why? First, because that option preserves, to the greatest extent possible, the frictionless trade—or something pretty close to it—which was originally the Government’s objective, but has not figured a great deal in government statements because it is not consistent with what the Government are now trying to do. There would be no rules of origin procedures, no VAT checks, no tariff or other problems which would arise. Investors in this country found this enormously attractive when they saw us as a gateway to the rest of Europe. I fear they will not see us as terribly attractive when we cease to be a gateway, with these friction-causing factors.
Secondly, I do not think that a customs union would solve the backstop, because the regulatory issues are extremely important there, but—as other noble Lords have said—it would make a substantial contribution towards resolving that problem even if it does not totally remove it. Thirdly, it would be likely to ensure us access to the EU’s already hugely substantial amount of preferential trade agreements—both free trade agreements and, in the case of Turkey, a customs union—in a way that would probably be much better than anything we could negotiate separately. The EU not only has this huge panoply of free trade agreements and a customs union with Turkey, but is negotiating now with Australia, New Zealand, Brazil, Argentina and Mercosur, and there are reasonably recent agreements with South Korea and Japan. The one with Japan has not yet been brought into force. The one with South Korea has, I think, brought a quadrupling of our exports to that market. We would get all these advantages if we were in a customs union, without having to do anything about it at all.
What is there not to like about joining a customs union? The noble Lord, Lord Patten of Barnes, quite rightly referred to the problems that might arise and the difficulties we would have negotiating new trade agreements with an independent trade policy. Those are very real, as those who have cited the size of these agreements have demonstrated rather clearly. But what do we have to show for all the rhetoric about the brilliant future that lies ahead of us from Dr Fox’s rather considerable travels, taking him this week to Davos, which is not noticeably a place for negotiating trade deals? Still, no doubt it is quite pleasant to be there. This idea that an independent trade policy is an instant answer to all our problems is simply a mirage that will float before our eyes for years ahead as we trudge through these extremely complex negotiations.
Who are the biggest fish in that pool? There is the United States. President Trump has already said that if we go ahead with the Prime Minister’s deal, which of course the House of Commons did not seem terribly inclined to do, he does not think that there would be much to negotiate with us about anyway. Do we really think China will be more interested in negotiating concessions to get access to our market than it would to get access to the much larger European Union market? India has been pointed out. That will put the whole issue of visas and access for people from India to this country on the table in the negotiations. That will drive another great coach and horses through that very odd immigration White Paper, which we will discuss in about half an hour’s time.
I really do not think that the objections to having a customs union stack up very well. The amendment should be given serious consideration and should figure in the Bill when we send it back to the Commons.
Baroness Neville-Rolfe (Con)
My Lords, I am not convinced of the merit of this amendment. Actually, I have taken comfort from the words of the noble Lord, Lord Purvis of Tweed, on the detailed arguments. I know from my experience of operating in Turkey—both with retail outlets and as a source of agricultural, clothing and electronic goods for shops in other member states and in the UK—that it is not an entirely happy situation to be in a customs union and not in the European Union or a single market.
Turkey was at the time keen to get into the European Union properly, partly because of the problems that the arrangements caused. It is very frustrating not to have influence over the tariffs and rules at the border of your country. Essentially, you are a rule-taker, as the noble Lord, Lord Purvis of Tweed, acknowledged. I also recall the lorry delays that he mentioned—so not very frictionless. My recollection is that the rules on the common external tariff also restricted Turkey’s ability to renegotiate independent trade agreements with third countries. That is something that the noble Lord, Lord Hannay, acknowledged. If we go down the road proposed in the amendment, we could be caught up in the EU system of protectionism—which, sadly, I expect to increase without the UK at the table.
On a brighter note, I was glad to see this afternoon that Dr Fox, the International Trade Secretary, had agreed in principle to a UK-Israel agreement—so he has been busy in Switzerland. Rather than going down the road of the amendment, I would prefer one last push to negotiate a good deal with the EU. There is more to do, but we should keep trying, especially on the backstop. Some parts of the Government have clearly not given up, as we heard in the EU Committee today from the Secretary of State, Steve Barclay, which is why, of course, I am afraid I missed some of today’s proceedings.
Viscount Ridley (Con)
My Lords, to be brief, as some others have put it, and with the greatest of respect, as the noble Lord, Lord Kerr, would put it, perhaps I might probe the Labour Party’s position on this. I used to hear members of the Labour Party, including many of those on the Front Bench in another place, make the argument that the problem with a customs union was that it hurt developing countries because of the external tariff. I would like to know what has happened to the argument and why we do not hear it from the Labour Party any more.
Lord Liddle (Lab)
My Lords, I will briefly express my support for the amendment. It is very important in the present political situation that we in the House of Lords demonstrate that, on a cross-party basis, there is some way forward out of the impasse we are in. For that reason alone, I support it.
The amendment obviously is not a complete solution to the Irish border problem. We would also have to have some arrangement of regulatory alignment. That, of course, is why the withdrawal agreement contains about 60 pages’ worth of EU rules that will apply in Northern Ireland but not in Great Britain, and why there would have to be some regulatory checks between Great Britain and Northern Ireland to make sure that rules on technical standards, health and safety, sanitation and that kind of thing would be adhered to. For there to be no border on the island of Ireland, that issue would have to be addressed, as well as the customs union. But the customs union is a large part, once you have made that step—and I do not think it is too far a step—of going on to deal with the regulatory questions.
On Labour’s position, it depends who you listen to. I am a great supporter of Keir Starmer, who talks about it in a very practical and common-sense way. But the truth is that sometimes people talk about a customs union as though it would be a relationship of equality between the United Kingdom and the EU 27 —which would, in effect, be trying to give the United Kingdom a veto over the Union’s autonomous trade policy. That will not work. It is not a runner. We could, as a big economy, negotiate very strong consultative arrangements, but I do not think that we would be granted a veto under any circumstances. Since we are in a position where we have to clarify these things in the next week—that is why have spoken frankly about this—it is important to acknowledge that that aspect is a non-starter.
So let us agree this amendment, refine it if we can on Report, and show that there is a spirit of co-operation in this House, which unfortunately there is not elsewhere.
Lord Bates
My Lords, this has been a fascinating debate. The noble Lord, Lord Stevenson, was very brief and succinct in introducing it. I will try to be pretty much the same in winding up. With the right reverend Prelate’s presence here and his questioning of a customs union, this is one of those debates where, after the past two years, I am not expecting to create many converts. Positions have been stated with great eloquence by my noble friends Lord Patten and Lord Lansley, and the noble Lords, Lord Kerr and Lord Hannay, but they are not ones that have differed, because of the veracity of the arguments and beliefs that they hold.
The noble Lord, Lord Liddle, came up with a great line which I scribbled down. I hope I have got it correct, because of course I do not have Hansard. He said that “on Labour’s position”—which of course my noble friend Lord Ridley asked about—“I suppose it depends who you are talking to”. I think I am right; I do not want to quote him incorrectly. It was an interesting point, because it would be fair to say that the Opposition’s position has differed between a customs union, a permanent customs union and a comprehensive customs union. It has oscillated between the crucial words “a” and “the”.
The noble Lord, Lord Purvis, applied a great deal of forensic scrutiny to this. His conclusion, and that of his party, is that they would be in favour of staying in the customs union, which makes it interesting that he has put his name to this amendment, which talks about “a” customs union. I cannot believe that there is now confusion even in the Liberal Democrats about what might be meant by this.
Lord Purvis of Tweed
The Government’s position, already stated, is that they intend the future customs arrangement to be based on those aspects of the Northern Ireland protocol which require agricultural and goods regulatory alignment with the European Union.
Lord Bates
We have been very clear about this; we want a deep and special facilitated trading arrangement with the European Union which allows all the benefits of free trade while allowing us to take advantage of the new opportunities which are emerging. According to the EU’s figures, 90% of growth over the next 10 to 15 years will be outside the EU—in India, China and the United States. That is what we need to tap into. That is what we need to be focusing on. We need to have the freedom to negotiate those independent trade agreements. If you go for a customs union, you are going to surrender that opportunity, and we are not prepared to do that. You would also surrender the right to shape the rules that you are going to have to implement.
Lord Kerr of Kinlochard
A brilliant description of the disadvantages of being stuck in a backstop.
Lord Liddle
Surely the best alternative way of benefiting from the growth outside the mature economies of western Europe—remember, this is catch-up growth; it is not a criticism of the European Union—is to be participants in the EU and its extensive trade deals with the emerging economies of the world. Why would we have a stronger negotiating position as 60 or 70 million than as an economy of 350 million or 400 million?
Lord Bates
Because 17.4 million people decided that they wanted to leave, and that is what the Government are committed to doing. I want to be careful not to be flippant about the subject we are dealing with; it is very serious, and the positions have been well argued. Nor do I want to be disrespectful to people for whom I have huge admiration, such as my noble friends Lord Patten and Lord Lansley, and the noble Lords, Lord Hannay and Lord Kerr, whose expertise I respect. But the position of Her Majesty’s Government is very clear. We have a deal. We should take advantage of that deal. A customs union would have all the disadvantages with few of the benefits. That is the reason we do not accept the amendment.
Lord Purvis of Tweed
Before the Minister sits down, I wonder whether he could advance this clarity. The noble Baroness, Lady Neville-Rolfe, states that we have now agreed with Israel to roll over our existing trading relationship with Israel. Israel does not have a free trade agreement with the European Union, or with us now. It has an association agreement, which has been in force since 2000. That is part of the pan-Euro-Mediterranean cumulation on rules of origin. This means that if we are replicating our existing relationship with Israel, we are replicating the rules of origin relationship that Israel has with the European Union. It also has common rules of origin procedures with Turkey, so if the Government’s position is that we are simply rolling over all of our current trading relationships through an association agreement with Israel, it means that we are now going to be bound by common rules of origin procedures with the western Balkans, the Faroe Islands and Turkey in the pan-Euro arrangement.
I am not sure why the Faroe Islands is part of that, but the reality is—and this is the point I was trying to make in my contribution—that we have to be open. If you want complete independence of trading relationships in the way the world trades now, that is impossible, so the Government have to have some limitations on it. If it is replicating the Israeli agreement, it is replicating exactly the same rules of origin alignment that we currently have with Turkey, and Turkey is part of a customs union with the European Union. That is quite simple, too.
Lord Bates
The Committee will come to rules of origin shortly, but on that point, that is the reason why, in the agreement that we are proposing—the deal that is on the table—we propose that to ensure that trading goods between the UK and the EU remains frictionless in the UK, there will be no routing requirements for rules of origin on trading goods between the UK and the EU. What we are talking about with Israel is consistent with that.
Lord Stevenson of Balmacara
My Lords, it is impossible to summarise what has been a very wide-ranging discussion. It certainly ended up in a rather more heated and fetid atmosphere than I expected when we set off. I have to say to the Minister, for whom I have the greatest respect, that it is fine to listen to what he is saying about what we ought to be doing and how we should do it, but he should point behind him when he is talking, because we do not get the arguments in the same way.
We started off with a description of hell, and what it might be to be listening to the same debates and discussions. I think we have justified the argument that we have moved on. The interesting thing that I took from this debate was how positions are being nuanced and changed as we move forward. There is an attempt from all sides to try to find common ground, and I wish that had reached all of our speakers. We are in a place that might be redolent of hell, with the colours that surround us and the flames leaping around, but I actually quite enjoyed being here. I am bound to go to hell anyway because of my previous life, so if this is what it is like, I quite like the prospect. But not yet—not yet. I call on the aid of the right reverent Prelate at this moment.
So what have we got out of this? We have got a sense around the Committee that there is something here that needs to be pushed to the next stage, and the Government should take away from this that this is a matter that will not go away, irrespective of what happens next week. By the time we get to Report, I am sure this will still be bumping around. I hope that by that stage we will have picked up on some of the points made by the noble Lord, Lord Lansley. We are getting hung up on what we mean by “customs union”, when we should be thinking behind the name—thinking about the process. It may be that we are likely to be close to, if not necessarily aligned with, EU current practice—and we ought to be, because, as my noble friend Lord Liddle said, size matters in these negotiations. Size matters, and always will, in any trading arrangement.
We are not really talking about tariffs. Tariffs are probably the 20th-century problem. The 21st-century problem is the regulatory barriers, and working on services to try to ensure that there is proper and fair trading, and that the issues at the heart of negotiations are rights and responsibilities, and the opportunities for providing benefits all round—a sort of development agenda meets trade, and coming together for the benefit of both.
The short, sharp intervention by the noble Viscount, Lord Ridley, was the most difficult to answer. I hope that, if he has the time, he will come back for the next group, when we will talk about some of these issues in more detail, and I will be able to give him a response. However, the truth is that I am quite happy with where the EU has got to with some of these trade deals. They are very good, and they would not be achieved by any smaller country on its own. We must not lose them, whatever arrangement we finally come to.
Viscount Ridley
The noble Lord has mentioned size twice. Can he explain why Chile, which is a smaller country than the European Union, has more trade deals with bigger countries than the European Union has?
Lord Stevenson of Balmacara
Maybe Dr Fox has an analogue that we do not know about, hopping around. “I do not know” is the answer.
Lord Patten of Barnes
Perhaps I can help the noble Lord. One reason why Chile has such good agreements around the world is that the agreement between it and the European Union—which is a very good agreement—was negotiated by your humble servant, as well as by others.
Lord Stevenson of Balmacara
In a spirit of mutual congratulation, I think it best to say that on this occasion we will withdraw the amendment—but we will probably want to look at the debate carefully and think about the wording of a future amendment. The subject will come back.
Brexit: Foreign Language Teaching and Public Service Interpreting
(5 years, 10 months ago)
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Baroness Coussins
To ask Her Majesty’s Government how immigration policy post-Brexit will take account of the recruitment of European Union and other foreign nationals to jobs in teaching modern foreign languages and public service interpreting.
Baroness Coussins (CB)
My Lords, first, I declare my interests as co-chair of the All-Party Group on Modern Languages and vice-president of the Chartered Institute of Linguists. We have a small but expert group of speakers this evening, and I would like to put it on record that many others have contacted me to say that they would have liked to take part but could not—notably the right reverend Prelate the Bishop of Leeds, who used to work as an interpreter and a GCHQ linguist.
In this short debate I will focus solely on how a future immigration regime must be finely tuned so that would-be immigrants to the UK, or people who are being specifically targeted for recruitment here to work as teachers of modern languages or as public service interpreters in our courts, police stations and health service, are not denied entry because of a salary threshold they cannot possibly meet, or because they are not regarded as sufficiently highly skilled to qualify.
We need to get this right for three big reasons. First, modern languages—already precarious throughout our education system—will suffer a body blow if schools and universities cannot recruit foreign nationals. An estimated 35% of MFL school teachers are non-UK EU nationals, with a similar proportion in the HE sector. Until we have a long-term strategy to produce enough linguists who will go into teaching, we need to be sure of the supply chain from abroad—mainly from France, Germany and Spain.
A salary threshold of £30,000, as proposed by the Migration Advisory Committee, would be a devastating barrier. The MAC acknowledged this in relation to education in general, but the problem is particularly acute for linguists. The National Association of Head Teachers said earlier this month that modern languages were among the subjects already most at risk from the drop in applications by EU nationals. The shortfall will only get worse with a salary threshold of £30,000. Government figures show that only 88% of the target number of MFL teachers were recruited in 2018, yet the demand is set to rise further, not least because of the Government’s own admirable policy that 90% of pupils should be achieving the EBacc by 2025. To do that requires them to do a language GCSE. This policy is doomed to failure unless the crisis of MFL teacher supply is urgently addressed. In the short to medium term, that cannot be done without overseas recruitment.
The salary range outside London for the first four years after qualification is £26,700 to £29,800. In the HE sector, staff need to be at spine point 28—more than half way up their pay scale—before they break the £30,000 barrier.
Classroom language assistants are also crucial for MFL in schools, and no fewer than 85% of them are currently from the EU. Many of them—the British Council estimates about 10%—are keenly recruited by their schools to convert from classroom assistant to trained teacher status. This is hugely beneficial to the MFL teacher supply chain, and would be threatened if the individuals could not meet new immigration conditions with which they would then have to comply. So I ask the Minister to give specific consideration to this point when formulating the new rules.
The second reason we must get this right is that the administration of justice and the quality of healthcare will suffer if the shortage of public service interpreters—PSIs—gets any worse. These are the people who are called out every day to police stations, courts, GP surgeries and hospitals to translate and interpret for defendants, witnesses, patients and their families. A few days ago, in answer to a Written Question I was told that the Government have “no plan currently” to alter the provisions of the EU directive which gave the right to interpretation and translation in criminal proceedings, which was transposed into UK law in 2013. But I am slightly suspicious about that word “currently”, so I ask the Minister to state categorically tonight that after Brexit the Government will not remove or water down those rights.
Around one-third of PSIs are EU nationals and, as with teachers, we need to continue to recruit them, not just look after the ones who are already here. A salary threshold of £30,000 would be even more of a barrier for them than for teachers because most are freelance, on an average hourly rate of around £15. An interpreter working solely on jobs paying the highest rate of £20 an hour, paid for six hours a day of face-to-face interpreting and working for 48 weeks a year, would still be earning only £28,000. Many are earning far less than that. Yet their work is highly skilled, often requiring technical and specialist vocabulary, and knowledge of the justice or healthcare system. Without enough properly qualified PSIs, we would undoubtedly see more of the kinds of cases reported in the Times last week, in which unqualified so-called interpreters were used by one agency for police interviews, resulting in such unprofessional behaviour that a criminal trial collapsed. This not only affects people’s rights but results in unnecessary public expenditure if a retrial or further detention is involved.
The All-Party Group on Modern Languages heard evidence recently from police and researchers working on transnational crime. They told us that terrorism and trafficking in people, drugs and firearms are becoming ever more sophisticated and complex across borders and languages, and that without linguists the police simply cannot do their job. Languages commonly required include Farsi, Kurdish and Nepalese, as well as EU languages such as Polish and Portuguese.
The current Immigration Rules include a shortage occupations list, which has a category for secondary school teachers of maths, physics, computer science and Mandarin. I ask the Minister to amend this to cover teachers of all modern languages. We need competence in Mandarin, of course, but we also need traditional European languages more than ever. Schools have just as much trouble finding teachers for these. Will the Minister add to the shortage occupations list a new category for the professionally qualified translators and interpreters who will be working either in public services, as I mentioned, or in the private sector, where their language skills will help build export growth and competitiveness?
That brings me to the third reason for making sure that we get this right: it is in the national interest, by which I mean the economy and our capacity to play our part on the world stage through soft power, international organisations and diplomacy—in other words, everything that is often rather crudely summed up as “global Britain”. We need dramatically to boost the numbers of school leavers and graduates who can speak more than one language proficiently, yet since 2000 more than 50 universities have scrapped some or all of their modern language degrees. We must not add to this erosion by depriving the sector of the foreign nationals who make up around a third of its language staff. Lack of language skills is a serious constraint on employability; the UK loses 3.5% of GDP every year in missed contracts because of a lack of language skills in the workforce.
Language education, as I hope I have shown this evening, is currently heavily dependent on the body of teachers we are able to recruit from overseas. A strategy which could, over time, produce enough homegrown linguists must be the subject of another debate. My key message tonight is that in the short to medium term, we would be shooting ourselves in the foot as a nation if we allowed language skills to suffer by knowingly placing unnecessary obstacles in the way of some of the very people who we need most to attract to the UK to help us redefine our place in the world. Will the Minister take the opportunity to state explicitly that MFL teachers, translators and interpreters are highly skilled people who will not be screened out by any new Immigration Rules on the basis of income or a blinkered definition of what constitutes skill?
Lord Thurlow (CB)
My Lords, I thank the noble Baroness, Lady Coussins, for securing this debate. It is a great pleasure to follow her impressive and convincing speech. I will put a slightly different spin on the debate and hope that I do not overlap too much with what we have heard. This debate goes right to the heart of our education process, as well. We need to improve the teaching of languages and need foreign nationals to teach them, but why do foreign language skills matter?
It is easy for us to be lazy—and we are criticised for this—when others often speak English. I read in the excellent Library briefing that under the Erasmus programme, twice as many students choose to come to the UK to study than to go to Germany or France, which are the next two preferred destinations. Our MFL learning is consistently poor compared with other countries, as we have heard, and there are regular calls from industry and educational bodies to raise attainment levels. Both for soft reasons of intellectual development and for hard reasons of commercial heft, we should not allow our schoolchildren to miss out on foreign languages.
Looking at the softer side, an organisation called Bilingualism Matters is based in Edinburgh and forms part of Edinburgh University. It provides research-based study on the benefits of language learning. I have read some of its work and spoken to one of its directors. Both indicated that research confirms the great benefits of language teaching. It gives students much more than an additional language. It is beneficial for children’s development more generally: they become aware of other cultures and other points of view. They also become better at multitasking and focusing their attention. Many become precocious readers. These are all powerful learning benefits, which put them at an advantage to their peers. It certainly gives them much more than two languages.
The harder aspects are visible in the professional and commercial worlds. I add to the comments of the previous speaker. Having worked in the global property market for 30 or 40 years, I understand the important role that languages play in business. The wheels of commerce benefit from these skills. Yes, English is considered the language of international business and banking and, yes, the majority of the deals we see done occur in our language. But we must take into account the rise of Mandarin, Spanish and Arabic in the business arena and the importance of being able to speak another’s tongue when it comes to developing co-operation and trust—the grounds on which good business is done. In the Brexit context, as we consider potential trade deals and reassess our place in the global economy, we must equip our young to make the most of the business opportunities that we will make available to them when we get through this confusion.
To support my views on commerce, I refer to an article I saw in the Times yesterday. It said that Highlands and Islands Enterprise in Scotland is encouraging the learning of Mandarin for the hospitality industry there. I could not believe it but it is even organising China-ready workshops, while expecting an influx of Chinese visitors following the introduction of a direct Beijing-Edinburgh flight. It is not a joke; it is really doing it.
I understand that a combined universities report of May 2016 on the value of modern languages said that business is lost to UK companies due to the lack of language skills. The UK’s soft power and effectiveness in conflict and matters of national security are limited by the shortage of strategically important languages. The UK is under-represented at internationally important institutions such as the EU’s civil service and the United Nations’ translation services.
Considering the importance of foreign language skills across intellectual development and in the professional and commercial world, it should go without saying that we need good-quality foreign language teaching staff. As an interesting indicator of the need for foreign language teachers, in Scotland two languages have been taught at primary level since 2014; this will be extended to all schools in two years’ time. It does not take one long to find evidence of language teacher shortages, as we have heard, across British schools. TES, the online hub for the teaching community, tells us that there is a shortage of some 31% in MFL teaching. While we may agree on the importance of promoting language learning, we cannot meet demand in language teaching, let alone hope to increase that demand.
The answer must be to attract foreign nationals as teachers and classroom assistants. Currently, an estimated one-third of foreign language teachers are European nationals. I believe that legislation is being put in place to secure their jobs here in the UK, but we need to do more. We need to positively attract more foreign teaching staff. The Migration Advisory Committee has recommended that the shortage occupation list of professions, which we have heard about, be fully reviewed. While Mandarin is on the list, as we have heard, that is not nearly enough. Let us not forget that these foreign teachers earn much less than the £30,000 visa threshold. Furthermore, they will put most of they earn back into the economy.
As an outward-looking global nation in which we pride ourselves on educational excellence, and as a nation looking at possibly a decade’s worth of re-establishing our global trade position, we must support language learning through ensuring that post-Brexit immigration policy encourages the recruitment of foreign nationals. My request to the Minister is to convince her colleagues to offer special treatment to these teachers from the EU in the related immigration Bill. The UK will be better off as a result.
Lord Dykes (CB)
My Lords, it is a great pleasure to follow the first two speakers, and I thank my noble friend Lady Coussins for launching this debate. This is a subject that is seemingly not big on the horizon, but actually it is crucial. I thank her also for the marvellous work she has done over the years as a chairman of our All-Party Group on Modern Languages, which has achieved great things. The emotional, marginal nature of foreign languages in Britain—which is really a curse—might suggest that we would not have very frequent meetings, but we do. We have interesting and varied meetings, full of content, with lots of outside participants, such as members of the Institute of Linguists. It is a very inspiring group. I am therefore grateful that today’s debate has been led by my noble friend Lady Coussins, and for what she said to raise the alarm on this issue.
We are dealing here with yet another miserable piece of Brexit legislation, and what a sad time this is for the country. One has to speak broadly about Brexit, because it is the background to all these matters. Today, in Committee on the Trade Bill, things were dealt with that would not have been necessary if the Government had handled the events subsequent to the election on 8 June 2017 more intelligently, in a way that would have led us to a different and more constructive channel of recovery and a rethinking of the nightmare that is affecting this country. It has made people thoroughly miserable. Youngsters feel fed up and have lost their morale as a result of what the senior citizens in the Government and politics have done, seemingly on their behalf but potentially causing only damage and destruction. This may seem a small segment of the Brexit background, but it is a very important one.
In recent years, the language background in Britain has been depressing. It is good to see the expansion of Spanish and Mandarin in British state schools and others, particularly for younger children, and to see how well and intelligently they deal with it and what they achieve. Learning Chinese is very difficult for older people, but children can cope with it. Other languages, however, are now in decline in universities and schools—German is a good example of this—but there is absolutely sacred evidence of their importance.
Years ago, I went to Dusseldorf to speak to the 50 officials at the British trade office who were promoting UK exports. Their first grumble—a familiar one in this country, which is spoiled by English being the dominant international language—was that so many British companies would not produce their pamphlets in German because of the extra expense, saying, “Why bother? Aren’t the Germans good at speaking English?” Many years after that visit, specific research showed that 9% net of business was lost by British exporters in Germany because we would not put our documents into German. German has really faded now in this country, and I hope that will not be so in the future.
I am spoiled by providence and my origins of birth. For some reason, I have always found languages very easy: I enjoy speaking and reading European languages, as well as Russian, but that is rusty because I have not used it in recent years. Due to finding it easy, I have a natural enthusiasm for language learning and teaching, which does not affect the ordinary citizen. I quite understand that. I am not criticising the ordinary citizen in this country for not feeling that way or for supporting the idea that they do not need to bother because “they all speak English”.
If it is unfair I will apologise to him immediately, but I was told on good authority that the previous Prime Minister, David Cameron, could just about manage to say “bonjour” and nothing else when he was at the Council of Ministers. But look at what our foreign friends in the EU can do. Some years ago, I had the great privilege of visiting the European Parliament, which has become increasingly important now. I heard the then President Barroso make a speech in five different languages, with several paragraphs in each. We could do that as well. There is no reason that British people should not be intrinsically just as good at foreign languages as anybody else, if they put their minds to it. I have spoken on this at great length because I wanted to focus on the background and on how this curmudgeonly attitude in Britain about languages has affected government policy.
On the Immigration Act, I was very impressed with the two documents, by Nicola Newson and James Goddard, that we in the House of Lords were given. They were very helpful in giving us the background on this. The second paragraph on page 72 of the first one deals with how this all started. It says:
“The shortage of teachers is not limited to a few subject-specialisms as in the past. The ASCL survey of January 2016 asked about the subjects found to be difficult. As might be expected the existing shortage subjects of maths and science head the list, but they are now joined by significant numbers of schools having problems recruiting teachers of English, modern foreign languages”—
which is the subject of this debate today—
“geography, history and other subjects”.
Later in the same document we get a Written Answer from the Minister, then Nick Gibb. He said in September 2018:
“The Government has commissioned the Migration Advisory Committee … to provide independent advice … to help develop a future immigration system. The Department welcomed their interim report in March and the contribution it makes to the immigration debate. Their analysis is incomplete and it would be wrong to pre-empt their final report. The Government will take account of the MAC’s advice when making decisions about the future immigration system”.
As my noble friend Lady Coussins quite rightly mentioned, the salary figures are usually below the threshold anyway, so the problem is intrinsic and it has to be tackled. I hope that will be so, because the Immigration Act is only a part of this. Regulations will follow later when the second stage of this exercise gathers momentum, and I am very sceptical about the Government getting it right.
I will refer briefly to the second document, Foreign Language Skills: Trends and Developments. I mentioned earlier the damage that is done, particularly to younger members of our society, if these things are closed down, reduced, not properly funded and so on. On page 9, paragraph 4, I was struck with the definition of “multilingualism” in the EU. Let me remind everybody of the idea that all 27 sovereign countries in the EU are happy with sovereignty and happy working together as a club in a succession of treaties. Why cannot Britain be the same? The definition states:
“Under the subsidiarity principle, member states of the EU are responsible for language rights and education. However, the EU is empowered to promote language learning and linguistic diversity among its members”.
That is one of the great attractions of the EU and another reason why we should stay in.
Lord Hannay of Chiswick (CB)
My Lords, it is a splendid initiative of my noble friend Lady Coussins to have this on our Order Paper. It is a little bit sad that not one single person on the Back Benches of the three main party groups in this House is present for this debate. The immigration White Paper, which is the focus of this debate, seems just about the greenest White Paper I have ever seen. I draw some hope from that because I really hope it is not set in concrete, particularly not that figure clutched out of the air of £30,000, which we have already heard from my noble friend presents serious problems in the two sectors that she has identified. I hope the Minister will confirm that there is plenty of scope for further consultation and change.
On interpreters, the extremely welcome statement by the Government a couple of days ago that they were going to waive the charge on EU citizens who wish to have settled status simply underlines the fact that we in this country are going to have 3 million or more EU citizens for the foreseeable future and, although a lot of them speak such good English that they put some of us to shame, many of them do not. Some of them will find themselves within the courts system or dealing with other forms of law enforcement or inquiry. It really is essential, if we believe in the rule of law in this country, that they should be given the services of interpreters who are genuinely able to help them explain how they got into the position they got into. The point about interpreters being able to come here is very important, because it is wider than a purely European one.
On language teaching, it is a cause of some despair, I think, to those of us who have lived much of our lives abroad and who understand that it is not any good believing that just because English is the lingua franca of the world of the 21st century we can just ignore other people’s languages and do business around the world without bothering to understand their culture or their languages and it will be all right if we just speak a bit louder—it will not. The journey on which we are setting out, or which the Government would like to see us setting out on, outside the European Union is going to be pretty rough and it will be a lot rougher if we are not able to educate businessmen, the military, diplomats—anything you like—to speak other people’s languages. It is quite clear from the figures that my noble friend has given that if the rules suggested in the White Paper are put in place, there will be an even greater shortage of language teachers, since such a high proportion of them are from the European Union. That is another extremely serious matter and I look forward to hearing the Minister’s response.
Baroness Garden of Frognal (LD)
My Lords, I join in thanking the noble Baroness, Lady Coussins, for introducing this debate. She is a tireless supporter of modern foreign languages and has campaigned for the public sector interpreters in their attempts not to be undercut by cheaper but far less qualified people. I thank those who have sent us briefings for this debate. The noble Lord, Lord Dykes, mentioned the Library briefing, and we also heard from the All-Party Parliamentary Group on Modern Languages about its views. It is a great pleasure to follow the noble Lord, Lord Hannay, who speaks with such expertise on these matters. I agree with absolutely everything he said.
We know that translation can increasingly be done online—sometimes with some rather bizarre results, I have to say, but nevertheless it can be done. But the very specialist task of interpreting, particularly for such people as court interpreters, cannot be so easily mechanised. They need to have a knowledge of legal procedures as well as language skills. We shall continue to need skilled interpreters, in very many diverse languages, to ensure that people who do not speak English are fairly represented. But we have not sent out messages of welcome for these specialist professionals and many have returned or are returning to home countries. People have a right to interpretation and translation in criminal proceedings; their very freedom may depend on fully understanding court procedures and their case being fairly put.
As we have already heard, as transnational organised crime becomes ever more sophisticated and complex across borders and languages, the police need interpreters and translators—not all thugs are British. So does the NHS, where communication issues can have consequences for health outcomes and fundamental rights such as patient confidentiality and consent. We certainly cannot rely on foreign nurses being there to help with translation, because the latest figures from the Nursing and Midwifery Council have shown that the number of new nurses coming from the EU to work in the UK has dropped by 87%, from 6,382 in 2016-17 to a mere 805 in 2017-18. This poses a real dilemma for the NHS and British citizens are unlikely to fill the gap.
I declare an interest as an honorary fellow of the Chartered Institute of Linguists. I read French and Spanish at university, lived in France as a child, in Spain as a student and taught in a Gymnasium while living in Germany with my RAF husband. That required a rather speedy learning curve to make sure I could understand at least enough German to know what the students were saying about me in class. I have always considered myself European, I am distraught by Brexit and I have always had a fascination with languages. Like the noble Lord, Lord Dykes, I enjoy learning them and do not find it too difficult, although when I became a member of the UK-Japan group I went into Waterstones to buy Teach Yourself Japanese in Three Weeks and the man selling it looked at me and said, “You won’t, you know”, and he was dead right: I have found that Japanese is a challenge too far.
It is deeply disturbing that the numbers studying modern languages have declined dramatically in recent years. In 2002 76% of students took a language. This was down to 47% in 2017 and, as we have heard, universities are closing their language departments. In both schools and universities, we are increasingly dependent on foreign nationals, particularly those from the EU, filling teaching posts. We have heard from the noble Baroness, Lady Coussins, and others that we have a recruitment crisis in modern foreign language teaching. As the noble Lord, Lord Thurlow, said, we need to attract native speakers of languages to come and fill those posts in our schools. How can young people be enthused by languages if there are not enough enthusiastic linguists to inspire them? We will end up in a vicious circle: there are not enthusiastic teachers, so the children do not get enthusiastic and do not go on to learn languages, and so the decline happens. This is really not helped by the perception that it is more difficult to get a good grade in languages than in other subjects.
As the noble Lord, Lord Thurlow, said, young people’s horizons can be broadened by learning languages. In doing so, they learn about other cultures and communities. The EU has stated that foreign language skills are important for citizens’ social cohesion and employability, and for the continent’s competitiveness and economic growth. If that is true for the EU, it is certainly also true for the UK. The education sector is extremely concerned about barriers to recruiting from abroad. Higher education institutions are particularly concerned about the risks to international mobility and co-operation for teaching and research. Of course, they derive immense benefit from EU funding and collaboration.
Foreign nationals contribute to the UK economy and help create the UK’s vibrant and world-leading research and innovation system. In universities and colleges, it is not just in the language departments: we read that in economics alone 64% of academic staff are non-UK nationals. There are real concerns that, post Brexit, there will need to be a significant increase in the number of visas to be issued, bringing increased cost and administration. There are currently just under 50,000 EU academic and non-academic staff employed by universities. Not all may need visas; certainly not all will be earning the threshold salary of £30,000, already referred to, which the Government are proposing; but all are doing jobs which may not be easily filled by native British people. There are many laboratory technicians and language assistants, for instance, whose work is invaluable. What plans do the Government have to issue visas and what guidance will be given to those who have not needed visas hitherto but who may in the future? Speed and simplicity will be of the essence. What about the threshold salary, which will be an enormous barrier to so many in the education world?
If we do leave the EU, it will be more important than ever that we can speak the languages of the neighbours we have turned our backs on. Why should they bother to speak English if we are no longer in the club? If or when the UK leaves the EU, only 1% of the EU population will speak English as a first language—little incentive for it to keep its dominance. French and German are waiting in the wings to resume their rightful place. As Willy Brandt was reported to have said: “If I am selling to you, I will speak your language, but if I am buying, dann müssen Sie Deutsch sprechen”. I will not insult the House by translating that. How will our trade deals look if we insist on speaking English loudly?
The Government’s ambiguity about the status of EU nationals has added to uncertainties and encouraged more of them to return to their countries of origin. A head teacher recently told me that a brilliant Polish physics teacher had decided to return to Poland so that her job could be given to a British teacher. Some hope! Physics teachers are like gold dust and the prospect of a replacement was a dim one.
Moving slightly away from teaching and interpreting, another sector which would be profoundly affected is the hospitality sector, which would be lost without foreign workers. British people, it seems, are not prepared to work in industries which require late hours, weekend working and hard physical work. I was talking to the owner of a West End restaurant recently who said he could not find any British people to come and work there because they did not like the hours. We enjoy eating in restaurants and staying in hotels but our choices will be severely limited if there are no foreign nationals to staff them.
We have wasted precious time in leaving EU citizens in uncertainty. The Government are now trying to make up for lost time, but for some it will be too little and too late. What is the Government’s long-term plan? What steps are they taking to ensure that EU citizens and other foreign nationals who are such a crucial part of the workforce and the community will be warmly encouraged to stay, with any administration as simple, friendly and cheap as possible? We have very real concerns about the future of our country without the very many foreign nationals who contribute so greatly. I look forward to the Minister’s reply.
Lord Watson of Invergowrie (Lab)
My Lords, I too congratulate the noble Baroness, Lady Coussins, on initiating this debate on a subject of some urgency. For that reason, I share the dismay of the noble Lord, Lord Hannay, that so few speakers have been motivated to participate.
For the UK to succeed outwith the EU, international awareness and skills, such as the ability to connect with people globally beyond English, are more vital than ever. However, the UK is currently facing a languages deficit, as other noble Lords have said. At the end of 2017, the British Council published a report on modern foreign language teaching in our schools and universities which listed Spanish, Mandarin, French, Arabic and German as the languages the UK will need most once we depart the EU. But recent research has shown that the percentage of 18 to 34 year-olds who can hold a basic conversation in those languages is 14% in French, 8% in German, 7% in Spanish and just 2% each in Mandarin and Arabic. This comes at a time when language learning in UK schools is facing what the British Council rather kindly described as a “difficult climate”, as the noble Baroness, Lady Coussins, said.
That is despite the introduction of the English baccalaureate which was, in part, designed to promote greater take-up of French and German, but does not seem to have made any meaningful impact. In part, that is due to a lack of suitably qualified teachers of languages for schools, and cuts to school budgets mean that there are fewer teacher education opportunities, especially in the lesser-taught languages.
The decline in the number of young people studying languages is hardly likely to have been lessened by much of the Government’s rhetoric since the referendum, fostering negative impressions of people who are “not like us” and hence of their languages. Such hostility has caused foreign nationals to leave the UK while deterring others from coming here. That policy is particularly demonstrated by the Government’s senseless determination to include overseas students in the immigration figures, when in fact they make a decisive net contribution to this country.
There is already a shortage of modern foreign language teachers, yet the Government seemingly ignore the fact that currently around one-third of those in post are non-UK EU nationals. We need more of them, particularly from France, Spain and Germany, as the noble Baroness, Lady Coussins, said, to plug the gap, but the generally inhospitable atmosphere—perceived or real—since the referendum makes that much more difficult.
The effect is also serious concerning the ability of young people to prepare themselves for the fast-changing demands of the economy in the years ahead. At a time when global connections matter more than ever, it is worrying that the UK is facing a languages deficit, because that restricts access by young people to overseas work experience, which is a vital part of preparation for them to develop a career in international business.
The threat to the ability of UK students to access the Erasmus+ programme after we leave the EU is an issue that the Government claimed that they would resolve through negotiation. We know all too well how those negotiations worked out, and now the country faces hurtling over a cliff edge in only nine weeks.
Failure to reach agreement with our EU neighbours can only lead to a reduction in the demand for undergraduate language courses at UK universities. What do the Government intend to do to ensure the supply of modern language teachers in our schools and universities? Although it is not within the ministerial remit of the noble Baroness, Lady Williams, I imagine she will have had advice from DfE officials for this debate.
The Government finally published their much-delayed immigration White Paper last month, and we know that free movement of EU nationals will end on 29 March. That will leave us with a single immigration system for all nationalities, with no cap on the number of skilled migrants. But what is a skilled migrant? It is a positive step that the Government have not followed the Migration Advisory Committee’s recommendation to retain the £30,000 salary threshold. But with the matter out to consultation, it seems that a salary threshold at some level is inevitable.
A threshold of £30,000 will not help to fill many of the skills gaps in the UK economy, not least the need for essential workers such as health and social care staff. The noble Baroness, Lady Garden, has just added several other skills, particularly hospitality. Newly qualified teachers can expect to earn around £23,000 outside London and around £26,000 in inner London—so, without doubt, language teaching and interpretation can be added to the list.
Highly skilled people from around the world contribute to the UK economy and help to create the UK’s vibrant and world-leading research and innovation system. As the noble Baroness, Lady Garden, said, currently almost 50,000 academic and non-academic staff from other EU countries are employed by universities. A supply of native speaker language assistants is crucial to the quality of higher education provision in modern foreign languages—a subject that is increasingly strategically important to national needs as the UK looks to engage more closely with the rest of the world.
Of disciplines which have the largest proportion of academic staff from the EU, modern languages, with 35%, is second only to economics with 36%. This raises the crucial question of salaries and how these people will be affected by the Government’s new immigration regime when it is introduced in 2021. According to the Higher Education Statistics Agency, 42% of all staff at universities earn less than £33,000 and 38% of academic staff earning below that figure are not UK nationals.
Analysis by the University and College Employers Association estimates that around 42% of technician roles in total fell below the tier 2 experienced worker threshold salary of £30,000 in 2016-17 and that the median basic pay of a language assistant in higher education is £26,000.
These figures lay bare the extent of the damage that the Government’s new immigration rules could have unless the arbitrary £30,000 threshold is lowered significantly. A supply of native speaker language assistants is crucial to the quality of higher education provision in modern foreign languages—a subject which is important to national needs as the UK looks to engage more closely with the rest of the world. Such native speakers inevitably come from outside the UK and are often on termtime-only contracts, which makes it even more likely that their salary will fall below the threshold as currently proposed.
The translation industry will also be forced to make some major changes to its recruitment process post EU. In the past, translation companies, many of which supply the public sector, have been able to take advantage of the mobility of workers between EU states to employ highly skilled staff from these countries. Freedom of movement is of particular importance to the language sector, as many services require their translation staff to be native speakers, which means that many current translators are not UK citizens. The result will be that the British language industry will have limited access to a skilled workforce. Despite the difficulties, those that do still wish to work here may well be deterred or prevented from doing so by the bureaucracy that will accompany visa and work permit applications.
In closing, I want to put some questions to the Minister. What is the position of EU nationals who want to come to the UK between 30 March 2019 and 1 January 2021? Are teachers of modern languages to be included in occupations that would qualify as tier 2 general visa applications? Otherwise, the salaries paid to newly qualified teachers will prove an insurmountable barrier. If they would not be regarded as being in suitable tier 2 general visa occupations, what will be the process for recruiting modern language teachers?
As in so much of the fraught debate around our departure from the European Union, it is a case of so many questions, so little time. I hope that the Minister will be able to answer at least some of them—but, if not, perhaps she will write to me.
The Minister of State, Home Office (Baroness Williams of Trafford) (Con)
My Lords, I congratulate the noble Baroness, Lady Coussins, on securing this debate and thank all noble Lords who have spoken in what has been my second non-fractious debate of the week. It seems that your Lordships have again taken a very measured and thoughtful approach.
First, the Government are in no doubt of the extremely valuable and positive contribution that our close European neighbours and other international workers have made—and, I hope, will continue to make—to support and contribute to the well-being of this country. International workers have enriched communities, brought new perspectives, expertise and knowledge, stimulated growth and made us the tolerant, outward-looking nation that we are today. Of course, teachers play a very important role in this by inspiring our young people and preparing them for the future—as do public service interpreters, as noble Lords mentioned, who ensure that otherwise vulnerable members of this society are able to access services. The noble Lord, Lord Hannay, mentioned the courts, which are a very good example of that.
In the post-Brexit landscape, we recognise that the focus on languages will naturally increase rather than lessen. We are clear that all children, regardless of background, should have a broad and balanced education that prepares them for adult life and success in the modern economy. Noble Lords have shared their examples of the various deficiencies in their multilingual abilities. My language skills amount to poor French and poor Italian, whereas my brother’s children, at the age of two, speak several languages and can change between them depending on who they are speaking to. I agree with the noble Lords, Lord Dykes and Lord Hannay, that we fall behind our European neighbours in our multilingual abilities. As they said, it is no good just shouting louder and hoping that they will understand us.
The Government are committed to ensuring that schools can recruit appropriately to fill their vacancies and that key front-line public services are supported by interpreters for all our diverse communities. We support organisations accessing the international talent they need through the immigration system, and we make special provision for certain occupations recognised as being in national shortage by the independent Migration Advisory Committee. In 2016, as noble Lords will know, the Government commissioned the MAC to undertake a review of the shortage occupation list to assess all teaching professionals in primary and secondary education, with a view to concluding whether they ought to be recognised on the list.
In 2017 the MAC published its findings. It identified that there was a case for modern foreign language teachers to be recognised as a shortage. However, it found no evidence to indicate that most foreign language teachers were recruited from outside the EU. Given that the immigration system currently applies only to non-EU nationals, the MAC considered, and the Government agreed, that it would not be sensible for most modern foreign language teaching occupations to be included on the shortage occupation list. However, the MAC considered that there was a clear case for Mandarin teachers to be added to the list, given the upward pressure on demand for Mandarin in schools—and they were duly added. Mandarin teachers also receive an exemption from the usual salary thresholds for tier 2, meaning that experienced Mandarin teachers can be recruited earning a salary of £20,800 instead of the usual £30,000.
The Government recognise that two years have gone by since that last review. We want to make sure that our immigration system keeps pace with the rate and scale of changes in the labour market. That is why last June we commissioned the MAC to undertake a review of the shortage occupation list. This time we asked it to look at the entire composition of the list, which comprises occupations across the economy; noble Lords mentioned various occupations, which I will include. The review is currently under way. The call for evidence, which I understand has elicited many responses, closed only last week. It is right that the Government await the outcome of that review before making any changes to the list. The review, which is intended to report in the spring, will include full consideration of modern foreign language teaching occupations within its scope. I am sure that the MAC will take due account of the fact that we are considerably closer to the UK’s departure from the EU and will be moving to a single immigration system in which EU citizens no longer receive automatic preference.
As noble Lords pointed out, on 19 December 2018 the Government published a White Paper setting out our proposals for the United Kingdom’s future skills-based immigration system, which will be implemented after the UK’s exit from the EU, following the planned implementation period. As part of those proposals, we proposed a new route for skilled workers. In line with the MAC recommendations, we will lower the current skills threshold to medium-skilled occupations at A-level and above; we will not cap this route and there will be no requirement for employers to carry out a resident labour market test for highly skilled roles. Teachers and public service interpreters, like other skilled occupations, will naturally benefit from these changes. To answer the question of the noble Lord, Lord Hannay, and a similar question from the noble Baroness, Lady Garden, although the MAC recommended a minimum salary threshold of £30,000 for skilled workers to enter via this route, the Government have been clear that we want to engage with business before taking final decisions on that.
As my right honourable friend the Immigration Minister said recently, this is the start of the conversation as opposed to the end. We have also been clear that businesses and organisations will need time to digest the proposals, which is why we have launched a year-long programme of engagement with a wide range of stakeholders across the UK. We are clear, however, that immigration must be considered alongside investment to improve the productivity and skills of the UK workforce, including innovation, automation and technology. Accordingly, we are working to grow a strong domestic pipeline of teachers and have a package of measures in place to support both the recruitment of trainees and retention. We have set aside funding to develop our domestic pipeline of modern foreign languages teachers, including offering scholarships and tax-free bursaries typically worth up to £26,000 for trainees in modern foreign language initial teacher training. We are complementing national initiatives by working in partnership with the Spanish Government to recruit visiting teachers from Spain through Spain’s visiting teachers programme to teach modern foreign languages in England.
The noble Baronesses, Lady Coussins and Lady Garden of Frognal, and the noble Lord, Lord Dykes, talked about wanting the Government to confirm that teachers, interpreters, et cetera, will not be screened out of the future immigration system through skill level or salary. I can confirm that language teachers, nurses and interpreters will meet the skills definition within the future immigration system. Posts on the shortage occupation list can benefit from this lower salary threshold, as I have said, and we will await the advice of the MAC on the composition of the list.
The noble Baroness, Lady Garden of Frognal, asked what plans the Government had to simplify the visa system and what advice we could give to EU citizens in the UK who had not previously needed visas. The immigration White Paper makes absolutely clear our intention to speed up and simplify the visa system through the greater use of technology. We have made it clear that we want EU citizens who are here already to stay. We have put in place a simple-to-operate settlement scheme, not a visa requirement, and this week we announced that they could use the scheme free of charge.
The noble Baroness, Lady Coussins, asked about the operation of the EU directive on access to interpreters. I do not know the answer to that and I will have to write to her, because I am not sure whether that has been transposed into UK law. I shall respond to noble Lords in writing on any questions that I have not answered. I again thank all noble Lords for their commitment to this, in particular the noble Baroness, Lady Coussins, and everyone who contributes to our world-leading institutions, whether they are schools, universities or the workplace.
Trade Bill
Wednesday 23rd January 2019
(5 years, 10 months ago)
Lords ChamberRead Full debate Trade Bill 2017-19 View all Trade Bill 2017-19 Debates Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: HL Bill 127-II(Rev)(a) Amendment for Committee, supplementary to the revised second marshalled list (PDF) - (23 Jan 2019)
“UK participation in EU’s Generalised Scheme of Preferences
It shall be the objective of an appropriate authority to take all necessary steps to implement international trade agreements which enable the United Kingdom, after exit day, to fully participate in, or replicate the objectives of, the European Union’s Generalised Scheme of Preferences (GSP) for low-income and lower-middle-income countries.”
Lord Stevenson of Balmacara (Lab)
My Lords, I sense there has been a bit of a change in the composition of the House—I cannot imagine why, because we have reached some of the more interesting elements of the Bill. Had the noble Viscount, Lord Ridley, who is absent, been present, he might have learned quite a lot. That will help me avoid the more sharply put questions.
Amendment 27 is a probing amendment in the sense that it is there to invite the Government to set out their plans, should they be necessary, in relation to GSP, the EU’s generalised scheme of preference. It is open to a wider range of issues, and in his dual capacity as Minister responsible for development, the noble Lord, Lord Bates, might well have a view that will add to our overall understanding of where we are. The noble Lord, Lord Lansley, has a similar amendment, although it is much more detailed and sharply drafted than mine is, and I look forward to hearing his comments.
It can be said in very few words that one of the things that one gets by being part of the EU is participation in schemes of the type that is being discussed here, which is an attempt to try to bring some sort of structure and order to the way in which trading relationships can sometimes impact on development activity and vice versa, by recognising that very often a good trading opportunity in a developing country is perhaps going to do more than any amount of aid, however well delivered and whatever focus it has. On the other hand, the impact of either favourable tariffs, reduced costs or support for various aspects of work on the trading side of that relationship can have quite a devastating effect.
It is to the credit of the EU—and I am sure that Ministers have been heavily involved in the shaping of the way this goes—that the GSP arrangement is being set up so that it is constantly monitored. We have recently seen the interim relationship of that. In short, the results are broadly supportive of the way the EU has taken forward this programme, with some reservations in the sense that it is probably too soon to say quite what some of the outcomes will be. It is recognising that there are longer-term benefits that will not be picked up by short-term measuring techniques, and of course there are dangers that come in relation to trying to focus too narrowly on some of the econometric figures without thinking about some of the wider social issues.
The GSP relationship, combined with Everything But Arms arrangements, is a way of seeing development happen in a constructive and progressive way, which is something that we support. In moving this amendment, I invite the Government to respond to the thoughts behind it. I beg to move.
Lord Lansley (Con)
My Lords, in following the noble Lord, Lord Stevenson, I am grateful for his kind remarks about my amendment. I was not required to produce any amendments and I produce relatively few but, by virtue of his responsibilities, he has to produce quite a lot of them so I think we will forgive him for the sighting shot that, in a sense, many of these amendments are at this stage.
The generalised scheme of preferences, for those who are reading our debate afterwards—I am sure that many will do so—is about giving preferential tariff reductions to developing countries to stimulate their economies and their exports to the European Union, as one of the world’s largest potential markets. It can be fairly said that it is something that we subscribe to and that we encourage. For that reason, in the Taxation (Cross-border Trade) Act 2018, the Government and Parliament have already legislated for a preference scheme in the future. Therefore, that is not the issue, which is why my amendment is structured in the way that it is. The issue is: how do we go about this? That is the point of Amendment 27. How far should the United Kingdom’s preference scheme—that is, the unilateral preferential tariff rates that we offer to developing countries—be structured in such a way as to correspond directly to what is presently the generalised scheme of preferences as reflected in EU regulations?
The starting point for this is that the EU regulations will last until the end of 2023. For the purposes of this debate, I am going to assume that we are not in a customs union with the European Union, because if we were that would automatically solve this problem. Therefore, we are outside the customs union and we have to make our own decisions about to whom we give a preferential tariff rate and when we vary from it. We did not have a debate here on the Taxation (Cross-border Trade) Act because it attracted financial privilege, so we are getting the benefit of that now. Quite a lot of the debate on the relationship with developing countries focuses on tariff reduction. That is important but, for the least developing countries, the objective is nil tariffs on—as it is expressed—everything but arms and ammunition. That is reflected in Schedule 3 to the Taxation (Cross-border Trade) Act. For the other developing countries—the eligible developing countries, as they are known—there is an objective to try to reduce tariffs to the fullest extent possible. That is already in there.
But of course the issue then is: under what circumstances do we depart from that? The fact that the GSP says nil tariffs does not mean that in all circumstances that is maintained. The European Union has not done this, but the regulation would permit the European Union to suspend the nil tariff, or indeed to withdraw the preferential rate, in respect of transgressions on the part of other states. That is a possibility where a country has flagrantly been abusing human rights. If a country chose to produce large numbers of goods for export to other countries on the basis of a flagrant disregard for child labour laws, for example, should one continue to offer a preferential rate? Many of us would say that we should not necessarily do that. We should then suspend the preferential rate in some circumstances where human rights abuses and the rule of law have ceased. The European Union has not permitted countries to be in the Everything But Arms GSP, so we have to make those judgments under those circumstances.
The point of my Amendment 65 is to say, as we proceed, that we should start with a scheme that conforms to the structure of the EU regulation, because everything is starting from the position of continuity—that happy word—but we would have the ability to move on. We may make our own judgments about the circumstances in which we would suspend or withdraw the preferential rate. It might apply in the circumstances I described. It might equally apply if we had to safeguard the industry of the United Kingdom. The same would be true in the EU, but we might choose to do it in different circumstances. For example, last week the EU applied a safeguard measure in relation to imports of rice from Cambodia and Myanmar. That may not be something that we in the United Kingdom would choose to do because we do not take the same view about rice production in this country as, for example, they do in southern European states. There will be differences and we will have industries to protect, but we do not necessarily have to follow the same approach as the European Union.
As a way of proceeding, my amendment would insert into the Taxation (Cross-border Trade) Act, under those circumstances, that the Government should come forward to Parliament, make a report and seek views before proceeding down the path of suspending or withdrawing this preferential rate, because we should be participants in that discussion.
There should also be an intention before January 2024—when the EU regulation expires—to look independently from the European Union at what our future structure on preferential rates should be. In my amendment I suggest that the Government should report to Parliament by the end of 2022 on their proposals, with a view to legislation being passed by the end of 2023 for introduction from 1 January 2024. Of course, EU competence has dominated this area of policy, but the time will come for Parliament to think about what our trade policy looks like in terms of unilateral preference rates for developing countries.
It is quite difficult even to work out the relationship between our structure of preferential rates and the EU’s. Simply to say continuity is probably misleading because I cannot actually find absolute correspondence between the benefiting countries under the EU’s standard generalised scheme of preferences, or what it calls its GSP+, which is for eight vulnerable countries. I cannot even find that we can correspond between that and what is set out in Schedule 3 to the Act. For Everything But Arms, the list is the same, so we know where we are with that. I think I found 28 EU countries that benefited from the standard GSP or the GSP+, but 43 countries that are intended to benefit from what is referred to in Schedule 3 to the Act as “other eligible developing countries”. The difference is obvious: the EU does not include formally the GSP countries which, by virtue of other agreements, have access to tariff reductions that are at least as good as would be available under the GSP—for example, it has association agreements with Egypt, Tunisia, Morocco and so on.
For us to replicate the EU’s GSP would mean significantly fewer countries having access to the GSP and to those preferential rates than would be the case in the European Union. I just say gently to the noble Lord, Lord Stevenson, that that is another reason why he and I will have to go away and think about our amendments again. It is not about reproducing the GSP regulation or the EU’s list. It is about ourselves arriving at a full list of the developing countries, particularly those which are not the least developing but countries eligible for the GSP that should get preferential rates but at the moment get them through other EU agreements. Those are not necessarily free trade agreements that will get rolled over. I am not aware that this is necessarily the case for all these association agreements; it may be for some, but not necessarily for all of them.
Therefore, I commend Amendment 65 to the extent that it raises the issue of having our own scheme, consulting on it and asking Parliament when we have to change the preferential rates. I do not commend it to the extent that I think it can be adopted at this stage, but I think we should come back to it. I hope Ministers will be willing to look at that and how they would go about managing the preferential scheme in the future.
Lord Fox (LD)
My Lords, I thank the noble Lords, Lord Stevenson and Lord Lansley, for bringing this issue to your Lordships’ House. We support greatly the spirit on these Benches. The noble Lord, Lord Lansley, used a contemporary example of rice. In another life a long time ago, I worked in the sugar industry for seven years. Of course, sugar is wrapped into this so deep that it is still embedded in there. On his point about the transition from us being part of a European scheme to going into a wholly United Kingdom scheme, I know that the pressure on that commodity alone would be huge, given the past relationships and previous problems that some sugar-producing countries have had within the European regime. That is just one commodity. His point is clear: that this is not a simple issue but one that requires a great deal of thought, but that thought must be had and is worth having. We support this process and will involve ourselves if necessary in how this gets taken forward. Clearly, we want to be part of a future regime that has these objectives, but the means with which to produce that are not necessarily as simple as they might look on first appearance.
Baroness Neville-Rolfe (Con)
With the GSP, the key thing is who benefits. In the past, some quite surprising people have benefited who perhaps do not benefit any longer, such as Mexico, Chile, South Korea and so on, which are now very rich countries. India was in there for a long time. It is important who is on the list.
I have some sympathy with the points made by my noble friend Lord Lansley. If we leave the EU, I believe that we should have more choice in which countries we help with tariff preferences. We should be able to take a more independent view, with an eye to our own history—for example, of the Commonwealth—and not necessarily just copy out the EU list. Obviously it depends on where we finally end up in our relationship with the EU, and I do not want to go into that, but if we end up having a certain amount of independence, that should apply to GSPs. I am not sure that this amendment should be in the Bill, but it is very good that we are taking this opportunity to talk about this useful vehicle for helpful the poorest developing countries that we all want to see develop.
The Minister of State, Department for International Development (Lord Bates) (Con)
My Lords, it is welcome to move from the group of amendments that caused maximum divergence to the group of amendments after dinner where there is maximum convergence. I think we all side with the way that the noble Lord, Lord Stevenson, led this debate by pointing to the immense benefits in achieving sustainable development goal 1, the eradication of extreme poverty by 2030. We are not going to do that by aid—aid is around £1.5 billion a year. It requires significant trade flows and therefore this is crucial.
I will make some very brief general remarks. Around £20 billion of goods a year are shipped to the UK from developing countries, accounting for around one-third of our clothing, one quarter of our coffee and other everyday goods such as cocoa, bananas and roses. This trade also creates jobs, helping people to work their way out of poverty. Consequently, I am pleased to confirm to the Committee that this has already been legislated for in the Taxation (Cross-border Trade) Act. My noble friend Lord Lansley might still have been on vacation when on 4 September I took that Bill through this House. Although the debate on it was brief, it was very good. I shall come back to that point later.
The trade White Paper confirmed the Government’s intention to provide, as a minimum, the same level of import duty reductions to all current beneficiaries of the EU’s GSP scheme as we leave the EU. I am also pleased to assure the Committee that Section 10 of the Taxation (Cross-border Trade) Act enshrines in UK law the obligation to provide duty-free and quota-free trade access for least developed countries. The Government will lay secondary legislation to set out these details of the scheme before we leave the EU if needed by March 2019, or at the end of the implementation period. In the future, we will look to improve the UK’s trade preference scheme by making it even more generous, simpler to attain and capable of working better for the poorest people around the world. Alongside this, our aid spending will continue to provide support and expert advice to help break down barriers to trade and to promote investment so that developing countries can take better advantage of these arrangements.
As the noble Lord, Lord Stevenson, mentioned, I also have the privilege of being the Minister with responsibility for economic development in the Department for International Development. It may be of interest to my noble friends Lord Lansley and Lady Neville-Rolfe and the noble Lord, Lord Fox, that in that context I am undertaking a review of how we might approach the opportunities to look at more beneficial trade and tariff-reduction packages and economic partnership agreements in future as we leave the EU. I would be delighted to take this conversation into the Department for International Development, for those who are interested, to meet officials so that we can delve more into some of the great expertise and ideas that we have heard today.
Lord Purvis of Tweed (LD)
The Minister’s commitment is very welcome. We know that we can take him at his word on that because he is very open and a very responsive Minister who is respected across the House. I will follow up a point made by the noble Lord, Lord Lansley. With regard to the 49 countries under the EU Everything But Arms policy and, according to the OBR, the 27 other low-income countries that the EU has defined, if on exit we are going to replicate the EU system we would also have to replicate the rules of origin system that comes with GSP+. GSP+ has distinct EU rules of origin requirements for those countries that are part of it. Is the Government’s intention to replicate the rules of origin criteria that the EU currently operates for them?
Lord Bates
I am grateful for the noble Lord’s question. His precise point is that we are aiming to replicate what currently exists, so we would take across the current applicable rules of origin into what we would be laying in secondary legislation before we leave the European Union. Once we have left—without a deal or, we hope, after an implementation period—we could devise our own scheme during that implementation period and be aware of the EU’s thinking. I know from serving on the Foreign Affairs Council that it has done some tremendous development work, particular with the post-Cotonou negotiations, as to how we fit. The current plan is that what is presently the case will initially also be the case for these countries.
Baroness Neville-Rolfe
Before my noble friend sits down, could he give me some reassurance about the wealthier countries on the list? Have they actually come off the list or is it our plan to make sure that the benefit of tariff-free trade is given to those who are worse off?
Lord Bates
Yes, and my noble friend Lord Lansley touched on this point. He talked about the treatment of different countries. We work from a World Bank list and an OECD DAC list of the least developed countries. As countries graduate—which is a normal procedure—they need to move to other agreements as well.
Lord Stevenson of Balmacara
My Lords, I am grateful to the Minister for his full response. We would welcome the opportunity to meet up with him.
We are converging on this point, though the noble Baroness, Lady Neville-Rolfe, is coming from a slightly different direction. She is hoping to see some quite quick change towards—I cannot think of the right word—a family relationship, involving Commonwealth and other markers which are not a feature of the other lists we have been talking about. It might make sense to try to work out where this is going.
We are among friends, so I can confess that I tried to do exactly what the noble Lord, Lord Lansley, did, which was to go back to the Taxation (Cross-border Trade) Act 2018 and try to work out where we were. I gave up, but he did not. I could not make out the list markers. The confusion comes because we are working from two different directions, as the Minister said. One is from a World Bank list of economic measures and the other is from a trading and development list which gives a different feel. Clearly, you get a different group of countries if you look at different indicators—not just poverty but the potential to export, the development status of their industrial arrangements and their other markets. We would have to think hard about all these. This does not vitiate the main point that it may not be necessary to put an amendment into this Bill, but it would be quite useful to have something where we, on all sides of the House, roughly understand the basis on which the Government are progressing. The Minister did say rather remarkably—but I hope it is true—that, whatever the timing, even if it were 29 March, they would be ready to make sure and clarify full details of what would be available to all the countries in scope on the GSP and on the Taxation (Cross-border Trade) Act approach. If that is true, he is obviously ready for the meeting and we are too. I beg leave to withdraw the amendment.
Lord Grantchester
“UK support towards an Environmental Goods Agreement
It shall be the objective of an appropriate authority to take all necessary steps to enable the United Kingdom, after exit day, to fully participate in and fully support negotiations towards an Environmental Goods Agreement at the World Trade Organisation.”
Lord Grantchester (Lab)
My Lords, I rise to move Amendment 28 in the name of my noble friend Lord Stevenson of Balmacara. I declare my interests, as noted in the register, on this amendment and on Amendment 30.
Amendment 28, which proposes a new clause, is a probing amendment to better understand the Government’s intentions in transposing or rolling over current EU trade agreements into UK law. Behind EU directives are policies and aspirations. Following on from the previous amendment, how far do these necessarily transfer over with this legislation? I point to the intentions specified under Clause 5(2) and Clause 3(3) that these trade agreements will mirror the existing EU agreements and that, where differences may occur, they will be specified. The relevant words are “any significant differences”, on page 4, line 26, and page 3, line 37. I ask the Minister to give the Committee a definition of “significant differences” and how we should interpret this. It is pertinent to many businesses and regions within the UK, as I shall draw attention to when we discuss Amendment 30 on geographical indicators. The Government may have a different interpretation that a trade agreement could affect existing and future trade.
One such issue relates to an environmental goods agreement, one of the ethical themes drawn attention to in our debate on Monday on Amendment 8 concerning international obligations. If the UK is to begin an independent trade policy, it is vital that sustainability is at the forefront of our intentions and agreements, including through a renewed commitment to the environmental goods agreement. It is important at this stage that everyone is familiar with the concept of environmental goods. They are not any particular product as such but more like a public benefit, in the same terms as the concept in the Agriculture Bill of “public goods”—not necessarily a profit-and-loss item to be bargained with. It is important that such environmental goods, as a policy background already in EU thinking to be transferred over on exit, do not get squeezed out of trade talks. At the very least it should be recognised that the EU has been a very good international forum for initiating these developments.
Although talks are currently on hold, the EU and 17 other participants of the WTO have indicated a willingness to negotiate an agreement to abolish tariffs on items used to achieve environmental and climate-protection goals. The idea, which unfortunately has lain dormant since 2016, has great potential and, despite the reluctance of some of the world’s key players to take the ambition seriously, there is hope yet that the agreement can be revitalised. Even in recent months we have seen positive signs that talks can return. In July last year, a white paper from the Chinese Government used previous talks on the issue as evidence of their commitment to sustainability. If talks are eventually going to be successful, and there is good reason to believe that they will be, an agreement would reduce and remove tariffs on environmental goods, including those aiding and abetting efforts to control air pollution, generate clean and renewable energy, improve resource efficiency, and manage and treat water waste and waste of all kinds. Such components aid our efforts at home to be more sustainable but will also help us to meet targets, ranging from the UN sustainable development goals to the Paris climate change accord.
Talks relating to the environmental goods agreement have stumbled, in part due to the lack of enthusiasm from some of our allies, but the core principle is one that the UK should get behind and re-energise. The UK should present itself as a champion of the negotiations, using our influence on the world stage to persuade those who seem reluctant to re-engage in negotiation. As the UK evolves into a separate entity from the EU, we should focus efforts on playing a central role in future negotiations with the vision to fully participate. I hope the Minister will agree and will assure the Committee that this is within the Government’s intentions. More specifically, I ask the Minister to tell us how the Government interpret “significant differences” and to assure us that the transposition of EU law will include the approach initiated at EU level towards trade agreements. I beg to move.
Baroness Young of Old Scone (Lab)
My Lords, I support my noble friend Lord Stevenson’s Amendment 28. The main objective of reducing tariffs on environmental goods in an accelerated manner is environmental, particularly the need to address climate change and the sustainable development goals, but an EGA also makes good economic sense. Among the benefits are reduced consumer prices for environmental goods. EGA tariff elimination can spur the uptake of energy-efficient goods, resulting in energy savings. I am sure the Minister will tell us that the EGA regulations at the WTO are not currently in a great place—or, indeed, in any place at all. We are told by those who espouse Brexit that we can and will show global leadership as a stand-alone nation. We would have been among those nations which support an EGA as part of the EU. Surely if we leave the EU, this is a good cause on which to start to show this global leadership role.
Viscount Younger of Leckie (Con)
My Lords, the UK Government support an ambitious environmental goods agreement. We believe that a high-standard environmental goods agreement would have three effects. First, it would enhance global access to clean technologies. Secondly, it would advance environmental protection. Thirdly, and not least, it would benefit UK workers, businesses and consumers.
Negotiations on the environmental goods agreement began in 2014 but stalled in 2016 due to disagreements over the scope of products to be liberalised and increasing global trade tensions. While the UK supports the objective of having an environmental goods agreement—and we have been a particularly active supporter in the WTO negotiations—I understand why the noble Lords, Lord Stevenson of Balmacara and Lord Grantchester, have proposed this amendment. I took note of what the noble Lord, Lord Grantchester, said. However, there is a reason we are not able to take this forward: it is already the objective of the UK to continue to support and participate in the negotiations on this agreement. That position will not change. It is not clear what “all necessary steps” in the amendment are, who would decide what those steps are, or what benchmark would be used to decide whether these legal conditions had been met.
I will attempt to answer the noble Lord’s question about significant differences. In our reports under Clause 3, we will be giving details and explaining reasons for all differences that have an effect on trade. There is no official definition, in fact. The noble Lord said that he is talking about the differences—let us be clear about this—in rolling over continuity agreements set out in reports which are prepared under Clause 3. If that does not satisfy the noble Lord, I am very willing to write a letter with the necessary legal ins and outs on this particular matter, but I hope with that explanation the noble Lord will be prepared to withdraw his amendment.
Lord Grantchester
I thank the Minister for his suggestions. It might be very useful to have a look at those, so that they are more widely known. I do not know how far they are already known or not, but I was unaware of them, so if he could write on that detail it would be significant. I thank him. I am pleased to have it confirmed that the intention and ambitions of the Government include the very point we wished to make with this amendment. With that, I am happy to withdraw the amendment.
“Involvement of judicial systems in trade disputes
(1) A trade agreement is not eligible for signature or ratification by the United Kingdom unless the agreement includes the provision in subsection (2).(2) Legal proceedings brought against the United Kingdom under investment protection provisions included in a trade agreement will be heard by the courts and tribunals system of the United Kingdom.”
Lord Stevenson of Balmacara
My Lords, in speaking to Amendment 29 in my name I will also speak briefly to the amendment with which it has been grouped: Amendment 56 from the noble Baroness, Lady Kramer.
At the forefront of my amendment is whether we should retain the rather disputed separate mechanism for resolving investor settlement disputes—this applies to rollover and new FTAs. The concept of ISDS is not new; it certainly predates us joining the EU in 1972. Over the years, we have had a very large number of trade agreements—some several hundred—which Members of the House will be aware of, and many of these contain clauses under which the ISDS was created. In the early days, it was done with some justification in some countries to try to ensure that investment from third parties—particularly private investment, which was obviously necessary to unlock the activity that was the focus of the trade agreement—could be protected in situations where political issues or other issues intervened. Given that the legal systems in some countries will not be regarded as being as well-developed as in other countries such as ours, it is not unreasonable to therefore concede that some sort of special protection was required. That is really where it came from.
I do not think that there is very much more to say about it, except that our argument is that these ISDS schemes are of a bygone age. They relate to a situation in the world that does not really exist anymore. It certainly does not apply to many of the countries with which we will be creating free trade agreements or rolling over existing arrangements. In so far as they have legal systems that we can respect, there should be no question that we should work with our own legal system and with theirs to reflect any requirement for the need to ensure that parties to the agreement can pursue the establishment of a tribunal and appellate mechanism for the resolution of investment disputes.
I should wait for the noble Baroness, Lady Kramer, to introduce her amendment, but in case she has any doubt at all, I do not support where she is coming from. I want to make it very clear that I am not alone in this: the most numerous of the very large number of submissions we received on the Bill were on ISDS. I am sure the Ministers are aware of that. It is worth thinking about the role that civil society more generally will play, but if just about everybody is saying that the Government should move away from these as a model and should think, as the EU is doing, about moving to a system that relies on existing tried and tested systems in the countries, this is something we should bear in mind. I beg to move.
Baroness Kramer (LD)
My Lords, I share one point with the noble Lord, Lord Stevenson, on this issue: many of the various systems for investor and trade dispute resolution are broken. A search is on for new, more effective mechanisms to deliver much more satisfactory resolution, particularly as trade arrangements become far more complex and encompassing, and disputes have much greater significance for the global economy.
The Committee will be aware that the WTO’s arbitration system is on the verge of collapse. It relies on a panel that includes a minimum of three judges and a maximum of seven. The panel, through death and retirement, is now down to three. The United States has made it clear that one further death or retirement will mean the end of the WTO’s arbitration mechanism—it will not agree to replace any retired or dying judges. That mechanism is now effectively teetering on the verge.
Many will also have been involved in the debates around TTIP when that was active in this House and will understand that the resolution methods contemplated under it created a great deal of concern that private companies—specifically American companies—would be able to use the mechanism to wade in and counter local law and local decisions. The structure under TTIP relied on arbitration panels chosen specially for the purpose, against which there was no appeal. They were not part of a traditional judicial system.
We do, however, have an example of a system that works exceptionally well for trade resolution: the European Court of Justice, working for the currently 28 members of the European Union. As Trade Minister, when I talked with the Chinese, the Japanese and a number of other countries with which we were trying to build trade relationships, it was very often in the casual relationships that the issue of dispute resolution would come up. They all spoke, with sad envy, of the system we had in the European Union, known to be incorruptible, fair and efficient, and to have judging panels of real intelligence that were then supported by the collective Governments. They kept wistfully saying what a pity it was that, on a global level, there is nothing that mirrors that.
This is why I differ from the noble Lord, Lord Stevens, who is basically saying that a British company with a complaint will go to the British courts, an American company will go to the American courts and a Japanese company will go to the Japanese courts. It would be hard to persuade anybody that they would be justly treated under those circumstances and that there would not be national bias. I can see this becoming an inhibitor to trade. I also believe that on trade issues generally we need to look to international co-operation and shared sovereignty solutions. We need to recognise that, frankly, the best example we have of trade resolution is the ECJ, and see what lessons and mechanisms we can pick out of that. This is relevant in discussing the continuity agreements as well as future agreements. As this House and the Minister will know, the European Union is now making dramatic changes to the way it structures dispute resolution, recognising the problems and criticisms around the existing system.
The noble Lord, Lord Stevenson, referred to the investor-state dispute settlement system. That is largely an ad hoc arbitration system, but it is in many of the EU’s various trade agreements. He will know, or certainly the Minister will know, that the EU is now migrating from that. In CETA, we have an example of the first new version of the European system: the investment court system. It is a permanent standing court with a panel of judges; it is not ad hoc; and it is two-tier, so there is an appeal mechanism. Interestingly, under CETA, the EU and Canada will collectively appoint 15 judges—five from the EU, five from Canada and five third-country nationals—who will hear cases on a rotational basis. It is therefore bringing in a much more multilateral dispute resolution system with a great deal of independence and the opportunity to create a much more broad template. There is an intention to migrate many of the existing EU trade agreements on to this system over the coming years, which is why the continuity arrangements pose real questions that have to be answered. In the continuity arrangements, are we copying over the rather unsatisfactory investor-state dispute settlement system? Are we going to try to migrate? It is going to be difficult. Look at the EU and Canada. You can see that the capacity to create a panel of 15 judges might be a little tricky if you were trying to do it simply between the UK and Canada. I do not know what sort of system the UK is looking at as it tries to establish a continuity agreement with CETA, but we need some answers on all this.
Lord Taylor of Goss Moor (LD)
If my noble friend will allow me to intervene, there is a really important point here. Many Members of both Houses have assumed that the WTO can be relied on as a backstop arrangement. But the Americans’ unwillingness to appoint new judges means that the WTO mechanisms are effectively being brought to an end, and that no reliance can be placed on the WTO as an alternative to the European Union mechanisms that she is describing.
Baroness Kramer
My noble friend is absolutely right. One of the frustrations when people talk so blatantly about WTO rules is that the United States is working very hard to undermine the entire structure of the WTO and is threatening to leave. Talk about timing: they hold up and pray in aid a system that is on the verge of crumbling. It is hard to see how the WTO rules will have ongoing force and substance when there is no dispute resolution mechanism available. It could happen any day; with elderly judges, all it takes is one death or retirement. This issue will not stretch out into the future; it is a current and immediate problem that has to be dealt with. In this House we often try to explain that the WTO has severe limitations and real risks, but apparently Brexiteers’ ears are closed to those concerns. I very much agree with my noble friend.
The Minister of State, Department for International Trade (Baroness Fairhead) (Con)
My Lords, first, I reassure your Lordships that the powers in the Bill will not be used to implement investment protection provisions, because such provisions in trade agreements do not require domestic legislation. I am grateful to the noble Lord, Lord Stevenson, for his explanation of the rationale behind Amendment 29, in his name. However, it would mean that no future free trade agreement could be signed or ratified unless any claims brought by foreign investors against the UK were heard by UK courts or tribunals.
The amendment overlooks the fact that foreign investors already have significant rights to legal redress in the UK—for example, through domestic law and normal procedures such as judicial reviews or commercial arbitration. As I think noble Lords would agree, UK courts are regarded internationally as reliable and independent. The amendment would preclude the possibility of disputes being resolved through ad hoc international arbitration tribunals, which is the internationally and currently accepted means of investor-state dispute settlements—ISDSs—in any future free trade agreement. So requiring investment disputes to be heard by UK courts or tribunals in all instances could undermine a framework that has successfully supported UK investors in many countries worldwide for, as the noble Lord said, a long time. In fact it has done so for the past 40 years.
The ISDS system does not allow other countries’ courts to have jurisdiction over matters that UK courts could determine themselves. Instead, it is independent of both states’ legal systems. It is important for foreign investors to have an independent means of redress, as they may be more susceptible to certain risks such as discrimination, as the noble Lord, Lord Stevenson, said. ISDSs allow claims to be brought for potential breaches of obligations of the type that the noble Baroness referred to—expropriation and discriminatory practice, et cetera.
The UK expects other countries to treat British businesses operating abroad as we treat investors in the UK. Although I do not believe that this was intended, it is likely that if this amendment were adopted, any future partners would insist on reciprocal provisions, meaning that any disputes brought by UK investors against a host state might also be required to be heard in that host nation’s courts.
I turn to Amendment 56, tabled by the noble Baroness, Lady Kramer. Accepting this amendment would mean that for any future trade agreements to be signed and ratified, they would have to contain an agreement on the parties pursuing a multilateral investment tribunal system and an appellate mechanism for the settlement of investor-state disputes. Before I go on, there is an issue with the WTO appellate court; I think that the members of the WTO are trying to resolve it. It is not directly relevant to the ISDS as it is a different system, so in the interests of time I will stick to ISDS.
Not all trade agreements cover investor protection and dispute settlements. We therefore do not think it appropriate to require all trade agreements to include a commitment to pursue a multilateral investment tribunal system. In fact, to introduce such a requirement might hinder the development of our trade policy. As I mentioned, ISDSs have provided UK investors overseas with a means of redress which is independent of and outside the host state’s national courts. The UK has over 90 bilateral investment treaties which include these provisions.
The noble Baroness, Lady Kramer, is absolutely right that reform of ISDS is under scrutiny. It has taken centre stage in recent years, frankly, with many international fora taking a keen interest. The UK supports the reform agendas which, as she said, focus on ensuring: fair, efficient and cost-effective outcomes of claims; high ethical standards for arbitrators; and increased transparency of hearings. We in the UK have supported the EU’s mandate to open negotiations to establish a multilateral investment court, or MIC, which would be a permanent body created to hear investment disputes. The CETA with Canada is currently the only EU FTA containing that investment court system. We are working with our Canadian partners on its provisions as part of the broader work on trade agreement continuity. This includes the question of our future approach to investor-state dispute settlements.
Lord Purvis of Tweed
The Minister mentioned Canada and it was interesting to hear that. May I seek clarification? I raised this issue on Monday in Committee with regard to Singapore. As a consequence of the court of justice judgment in May 2017, the Singapore agreement was made into two: a stand-alone free-trade agreement and a separate investment protection agreement. These draft trade and investment agreements were signed on 19 October last year. What is our position in the UK on seeking to roll them over? I think the Government have stated clearly that they will roll over the free trade agreement. Do they intend to roll over the investment protection agreement also, which is quite distinct?
Baroness Fairhead
My understanding is that it does not require any further domestic legislation. I will write to the noble Lord if that is in error, but I understand that it is already in domestic legislation. If that is incorrect, I will write to him and put a letter on file in the Library.
Baroness Kramer
I understand what the Minister is saying, but as she addresses that issue, would it be possible to understand what will happen with the other continuity agreements? Singapore is just the beginning. We will be seeing others moving over to this split—a free trade agreement here, a dispute resolution system there—and it is unclear whether we will have negotiated to follow that pattern and to mirror that split of the new structure, or whether we will remain tied into the old structure while the EU moves on to the new one. There must have been an internal decision somewhere in government on how we deal with this.
Baroness Fairhead
I am happy to meet the noble Baroness and the noble Lord with officials to go through the detail of this, and then we will prepare a letter for the Committee if required. The discussions on whether the UN Commission on International Trade Law—UNCITRAL—should seek to establish a multilateral investment court are in their preliminary stages; there are no firm proposals on the structure, governance or cost. We are actively engaged. However, discussions on that possible reform are at an early stage. We should not prejudge the outcome of that process, because to do so could preclude the UK from making a later judgment when proposals are more advanced. We look forward to working with international partners. In addition to the discussion I offered, I welcome discussing this topic further. There are a range of views on this question. At this stage, should the UK require a universal commitment to pursue a multilateral investment court in all future agreements, that could result in the loss of our negotiating space.
In respect of the true aims of this Bill and the resolution systems that are already in place, and given our commitments to discuss MICs, I ask the noble Lord to withdraw his amendment.
Lord Stevenson of Balmacara
I am grateful to the Minister for her full discussion of these issues. As she started I was thinking that we could have got a better result if we had drafted Amendment 29 in the positive rather than negative tone—to make it optional in, rather than to restrict out, which was the main complaint she had about it. As the argument has extended, I can see there is a lot more going on here than we were aware of at the time we drafted it. I am sure that I share with the noble Baroness, Lady Kramer, the idea that if we can have a discussion about all the various things going forward, we might be able to have a better understanding of where, if at all, there is any need to move on that.
Having said that, the Minister mentioned that there was a lot of interest in it. I stress again that this is the one single issue that I have had the most correspondence about. Just about every group involved in trade and development has picked this as its number one issue. It is good that work is being done on it, in the sense that one is not trying to constrain good and effective systems that arrive at having a fair, efficient and highly regarded court that will have all the details and be able to deal with the various aspects of it. Clearly, we do not want to disadvantage other countries in relation to anything we might be doing. These are the pieces in play, as it were, and it is a question of trying to get confidence from Ministers and officials that things are moving forward.
In some ways—although this may be the wrong line to follow—it is quite like the discussions on the Unified Patent Court. There is a person not too far away from the noble Baroness who has quite a lot of detailed experience of that. That is an ad hominem—I do not know what the Latin is—but it relates to a particular issue: patentem. It has a link into but is not part of the European Court of Justice, which would play back to the noble Baroness, Lady Kramer. It might be too elegant a solution, but I wonder if that might be something we might also pick up, because there is something in there that might square all the circles. With that, I beg leave to withdraw the amendment.
Lord Grantchester
“Geographical Indications
It shall be an objective of an appropriate authority to take all necessary steps to implement an international trade agreement which ensures mutual recognition of Geographical Indications in the United Kingdom and the European Union.”
Lord Grantchester
Amendment 30 is a probing amendment. It may not be of great intent but it is of wide importance to rural areas and the food chain in general. Following on from my earlier amendment which sought to understand the rollover nature of EU trade agreements into UK law, this involves the protection of geographical names designating agricultural products that have been in existence for more than 100 years. This is where the Minister’s definition of “significant differences” will be most helpful.
At present, as an EU member state, the UK falls under three specific geographical product designations. The first is the protected designation of origin—PDO—such as that for Stilton cheese, of which I know the Minister is well aware, which is designated to cheese-making dairies in three east Midlands counties. Secondly, there is the protected geographical indication framework, such as for West Country beef and lamb. Thirdly and lastly, there is the traditional specialities guaranteed framework, such as for traditionally farmed Gloucestershire Old Spot pork. These co-ordinated efforts have given some of the UK’s most well-respected and internationally renowned produce the legal protection it deserves. From each corner of the UK, British produce of world-class quality with links to a certain area or using certain traditional methods has had its reputation enshrined, preventing outside manufacturers reproducing or passing off the product and selling it as a regional one. There is great concern that these protections will be lost post Brexit.
I ask the Minister: what is the status of the recent EU-Canada trade agreement that has been mentioned throughout our proceedings? The noble Lord, Lord Purvis, brought up this issue under Amendment 18, and the noble Baroness, Lady Jones, did so under other amendments. Under the Comprehensive Economic and Trade Agreement—CETA—no UK geographical indicator was given protection and only two European indications were included. What was the role of the UK Government in negotiating this EU agreement? Will it be included in the rollover of EU agreements, or will it be challenged or disagreed to by Canada as a counterparty in any rollover? The ink is barely dry on this new agreement. What the Minister has said so far needs to be clarified further in this respect.
With the UK leaving the EU, the position of the food chain, including retailers, in rollovers, and the relative importance given to the issue by the UK Government, these matters will impact on the ability of UK products to be designated foodstuffs under the GI schemes. I understand that the Government wish to set up a UK register of designations after exit. Will these be exclusively British? Will it include the register under the EU scheme, including those products registered by non-EU producers who also use the scheme as a marketing tool, aiding their promotion within the EU? How comprehensive will this register be? It is important to recognise the high percentage of UK trade that goes to the EU. Will the UK Government seek to enable products designated on the UK register to be considered for inclusion on an EU register? Will the Minister confirm that reciprocal arrangements will be maintained without any sunsetting? She will recognise the importance of Welsh lamb exports to the economy of north Wales and the whole of Wales.
If I may, I have some further issues about which I would be happy for the Minister to write to me. First, there will be various transitional costs, such as branding and labelling. As changing labels is a resource-heavy activity, can she give reassurances that changes will be considered together in future regulations? Secondly, can she say what will be the resolution scheme or body that hears disputes? Will the future TRA adjudicate immediately on these PDO issues or will there be a role for the First-tier Tribunal, which presently presides over branding issues? These and other issues are not important for the proceedings tonight, but I merely flag up how essential it is to businesses, especially SMEs, to be aware and informed of the changes happening, even on transition.
The Minister will be aware of the wide benefits that these designations bring to the food chain—the reduction of food waste, the provenance and security for consumers, and the quality of the product—and export markets across the world, as well as the obvious financial and employment benefits. I would welcome confirmation that this amendment is among the objectives of the Bill and future trade arrangements, taking at face value the task of the Bill merely to transfer existing EU agreements into UK law. I beg to move.
Lord Tyler (LD)
My Lords, I am a signatory to this new clause and I am delighted to endorse everything that the noble Lord, Lord Grantchester, has already said. By way of background, I was responsible for my party’s policy when some of these issues were addressed in the other place when I was responsible for agriculture, food and drink. I also represented a Cornish constituency and I shall come back to that in a moment.
It is very dear to my heart, as I know it is to the Government’s Chief Whip, that we should recognise the particular contribution of the agriculture industry in this country and that we should recognise that it is going to go through some very difficult times in the near future if what is projected comes to pass. In those circumstances, it is extremely important to address the issues to which the noble Lord has already referred.
Protected geographical status was introduced throughout the EU in 1993, when I had that responsibility in the Commons. I was especially delighted when the schemes were updated under Regulation 1151/2012 during the coalition Government. This has been a great success by Ministers of all three major parties—we should recognise that. It is instructive to see how influential UK Ministers have been on an issue such as this when they have played a full part in the EU. It has also been a very interesting example of how the EU has provided essential trading encouragement and protection for uniquely significant food and drinks products from all parts of the United Kingdom.
This is not nostalgic parochialism, as I think the noble Lord has emphasised. It has real economic marketing benefits, as well as protecting our producers from cut-price and inferior competitors. The UK could never have achieved anything like this benefit without the support of our European partners.
There are 65 products with protected status under this scheme in the UK. They are designated to protect the reputation of regional products, to promote traditional and agricultural activity and to eliminate non-genuine products of inferior or different character that may mislead consumers—I will come back to that point. Obviously, I will not go through all 65 products at this time of night, but I will take one or two examples: the traditionally farmed Gloucester Old Spot pork, which I know extremely well because I have neighbours who produce just that, introduced by the coalition in 2010, West Country lamb and beef, Dorset Blue cheese, Single Gloucestershire cheese and Export Jersey Blue. There were very significant improvements to the marketing opportunities for those products, but also, much more generally, for West Country farmhouse cheddar, Cornish sardines—again, dear to my heart—and Fal oysters in 2013.
However, we have to be very careful about the use of these descriptions. As the noble Lord said, one of the particular characters is protected geographical indication. It happens that in my constituency we had one of the best vineyards in the whole of the United Kingdom, the Camel Valley vineyard. That is not in England, it is in Cornwall—and as all Members will know, Cornwall is not part of England, it is not an English county. I have a particular attraction to the wines from that vineyard, not just because it was local to my constituency but because one of the partners of that extremely enterprising vineyard was Annie Lindo, who stood for the Labour Party against me in a general election. She did not win, but the Guardian said that the wake would be one of the best in the country—and it certainly was. The vineyard now produces an excellent rosé as well as sparkling wine.
Cornish clotted cream was another big issue—and I will come to another very important dish in a moment. I remind the House that the difference between Cornish and Devon clotted cream is that Cornish clotted cream is so good that you must have it on top of the jam, while in Devon you can put the jam on top—otherwise, you do not get enough.
Cornish pasties were another big issue. My noble friend the then honourable Member for Truro will recall that it was on St Piran’s Day, I think, that one of our coalition colleague Ministers announced that the Cornish pasty was to be protected. That is a classic example, because of course the recipe for a Cornish pasty is quite precise. It is not permitted to add carrots or peas, let alone minced beef or lamb; it must be skirt of beef. I have had pasties in different parts of the world. Indeed, a part of Lithuania produces its own pasty, originating in the Middle East—but it is not a Cornish pasty. This is a serious issue. I ask noble Lords to recognise that this can be of huge importance to not just small enterprises but substantial ones, too.
Lord Taylor of Goss Moor
I think that Stilton is wonderful, but the Cornish pasty is much more important. The issue is that these protected designations are often extraordinarily important to some of the poorest rural economies in the country, as they are in other parts of Europe. At a time of enormous uncertainty for such economies over how Brexit will progress, whatever one may think about it, I think my noble friend would agree that it is extraordinarily important that we ensure that the protections for these specific local and regional products, which underpin those regional and very poor economies, are maintained. That is at the heart of this proposal.
Lord Tyler
My noble friend is absolutely right. The important point is simply this: here is a truly successful scheme where UK Ministers have taken the initiative and grabbed the opportunities in the EU. We cannot allow it to disappear. The threat to a large number of enterprises would be disastrous. It would set such a bad example to the agricultural and food industry if we allowed the scheme to be diluted or dissolved in any way.
As we know, the Bill and the proposed new clause are caught up in the rather absurd contingency planning for the crash-out, no-deal scenario that the Government now insist Parliament must play with, despite the dire warnings about how awful such a result would be. If we are not careful, not carrying forward this very good scheme would be disastrous. Indeed, it would be tragic if this excellent scheme, in which successive Governments have invested so much energy, initiative and political capital and on which so many UK producers rely, were lost in the wash. The threat is there.
Of course, the ideal solution would be for it to continue exactly as it is now, with full UK membership of the EU—but I suppose we have to admit the possibility that the ideal will have to give way to the best available replication: hence the proposed new clause. In the words of the 20th century’s most authoritative actuary, Frank Redington, we are faced at the moment with an “expanding funnel of doubt”. We cannot afford for there to be any doubt about the success of this scheme and the necessity of its continuation. The best we can do is to insist, through the amendment, that we do not throw out this precious baby with the bathwater.
Baroness Kramer
My Lords, my son lives in Kent. I enjoy giving sparkling English wine from an excellent local vineyard as a present to various people, so I am slightly put out to understand that some local campaigners for Brexit have been urging vineyard owners to look forward to the day in late March when they will be able to call their product “champagne”—apparently with the Government’s backing, they have been assured. It is important that we understand the reciprocal nature of an arrangement like this. Therefore, to feed the expectation that we will keep our designation but remove it from other people is highly dangerous, and I suspect that the Minister sitting on the opposite Bench will have heard some very similar language.
Baroness Fairhead
My Lords, the Government see GIs as extremely important, and we are working to ensure that existing UK GIs will continue to be protected in future. I note the comments of the noble Lords, Lord Tyler and Lord Taylor, about the importance to specific rural economies. I could not agree more. They play a really important role in some very remote economies. For example, lest Scotland be forgotten, I know that the Scottish salmon industry directly supports 8,800 people, mainly in coastal locations. I hope my words today will offer noble Lords significant reassurance on a number of the points raised.
Baroness Kramer
I will be asked this question by the sparkling wine producer. Will Champagne, for example, need to apply to the UK for protection of its name, or will this carry over?
Baroness Fairhead
I was just coming on to that point: the future protection of UK GIs in the EU and then the reciprocal. We have heard loud and clear the desire of UK GI producers, and I can assure noble Lords that we are seeking to make this happen. At the time of this amendment being tabled, I believe there was no public statement from the EU on the future of existing GIs after exit. Since then, the European Commission has publicly stated, in November 2018, that:
“EU-approved geographical indications bearing names of UK origin … remain unaffected within the EU and therefore continue to be protected in the EU”.
This is consistent with what has always been the UK’s understanding. We expected that existing UK GIs would enjoy continued protection even after exit, because the current legislation means that the protection is indefinite unless specific grounds for cancellation are met. These grounds do not include removal from the EU. UK GIs will therefore continue to have the same level of protection as other third-country GIs protected in the EU. They are protected by virtue of being on the register, having earned that right by successfully passing the EU scrutiny processes. That protection will remain unless the relevant entries can justifiably be removed.
Lord Tyler
The Minister has been very kind in giving us so much detail. Do I understand that the EU has guaranteed that the reciprocal arrangement will continue if by any chance there is no agreement? What happens if one of the other countries challenges that designation—that protected status—and we are no longer a member?
Baroness Fairhead
As I stated, the protection is indefinite unless there is a justifiable challenge, which would take an enormous amount of time—and that does not include leaving the EU.
The EU needs to comply with the TRIPS agreement in relation to how it handles GIs, and the EU member states are also bound by the European Convention on Human Rights. In terms of future protection of the GIs in the rest of the world, we are currently working with global trading partners to transition those EU FT agreements, which also include obligations on the protection of GIs.
Regarding the protection of EU GIs in the UK—I think the noble Lord was talking about reciprocal arrangements—should we reach a withdrawal agreement with the EU, existing EU GIs will be provided with the same level of protection as now until the future economic relationship agreement between the UK and the EU comes into force or becomes applicable and supersedes. The potential long-term protection of EU GIs in the UK would therefore be determined as part of the negotiations under the future economic partnership. It is key for the Government to retain different options to give the flexibility needed successfully to conclude these negotiations.
Baroness Kramer
I did not understand this: so if there is no deal, the EU has given a guarantee that it will protect UK GIs—and its system would require it to do so—but the UK has given no guarantee that it will protect EU GIs or those of any other country. Is that correct, unless it goes forward into the continuity agreement?
Baroness Fairhead
The departure from the EU is just between the EU 27 and the UK. It is true that, legally, UK GIs are protected under EU law indefinitely and in the UK the matter is subject to negotiation under the FEP.
I have assured your Lordships that we understand the desires of UK GI producers for continuity. We will continue the protection in the UK, and the public statements of the European Commission give us assurance. If this amendment passes, it would remove the flexibility necessary for the UK’s negotiating position to successfully build new trade relationships with the EU. I believe that a number of my answers addressed the questions raised by the noble Lord, Lord Grantchester. If he feels that they have not, I am happy to write to him, but I ask him to withdraw his amendment.
Lord Grantchester
Following up on the assiduous questioning by the Liberal Democrat Benches, I entirely understand what the Minister is saying about the EU and the UK and that the position will be maintained indefinitely going forward. However, can she clarify the situation of the two registers and how reciprocal they will be? Will it involve two applications from a UK producer, one to the UK register and one to the EU register, or will reciprocity maintain throughout, such that when they appear on the UK one, they will necessarily appear on the EU one at the same time? Will there be one system with two applications, as it were, both inside the EU when the UK is within it and outside the EU when the UK leaves? I hope I have made myself clear on that point.
Could the Minister say anything at all about the appeal process—the dispute mechanism—or will that be included in her letter to me on the more erudite questions I have asked her?
Baroness Fairhead
My answer on the application procedure is that there will be a very similar procedure of application when the UK leaves the EU. There will be two processes that are very similar, but equally the UK will have to comply with TRIPS and with the European Court of Human Rights.
I just wanted to add a word about the CETA agreement without taking too much time. There are no UK GIs recognised in the CETA agreement. That was because Scotch whisky already had protection in Canada. The final decision on which GI products were submitted in the trade deal negotiations was made by the EU in an agreement negotiated with all parties. On leaving the EU, the UK will be able to take back that decision-making, but I am happy to confirm that and I will write to the noble Lord on that subsequent point. On that, I invite him to withdraw the amendment.
Lord Grantchester
I thank the Minister for all her clarifications. They have been very helpful. I also thank the noble Lord, Lord Tyler, and his colleagues on the Liberal Democrat Benches. I realise that Cornwall is a very long way away from Merseyside and Cheshire, but I will have to check my passport arrangements. I do know that Cornish people are always very eloquent, and I thank him for all his comments. Having said all that, and understanding the utmost importance and gravity in which this subject is held dear to the Government’s heart, I beg leave to withdraw the amendment.
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